Generation Rent looked at figures from the Office for National Statistics (ONS) and found that in June 2019, 6.66 million 15 to 34-year-olds lived with their parents, accounting for 40.1 per cent of people in this age group. 

When offices and universities closed due to lockdowns, people moved back in with their families and by June 2021, this figure rose to 6.97 million, or 42.3 per cent of people aged 15 to 34. 

300,000 young adults moving out of their parents’ homes added to rental demand since the end of pandemic restrictions in 2021, which has allowed landlords to name their price. 

When lockdown measures started to be lifted, the number of people aged 15 to 34 living with their families dropped by 307,000. 

Generation Rent also found that the size of the deposit protection system increased by 101,000 in 2020 to 2021, which was 50 per cent down on pre-pandemic averages of 150,000 each year. However, this surged in 2021 to 2022 by 217,000 and rose again in 2022 to 2023 to 226,000, suggesting more renters had joined the market. 

A drop in rental demand did cause average rents to fall in the 12 months to 2021, but this rebounded in 2021 to 2022 with a 12.3 per cent rise in average rents across the UK.  

The organisation said this contradicted the idea that rents had gone up because of low stock. 

This was reflected by the English Housing Survey which showed that there were 178,000 more private rental homes in England between 2020 to 2022. 

Less movement 

Generation Rent said tenancy deposit data showed that tenants were less likely to move from their properties than they were before the pandemic. It said this was first because of restrictions and uncertainty, but more recently because of higher rents. 

This insight was based on the proportion of tenancy deposits being returned to renters, which came to 31 per cent in the year to March 2023, compared to 40 per cent in 2019. However, this was slightly higher than the 28 per cent of deposits that were returned in 2021 to 2022. 

The organisation said the lack of movers meant there was more competition for empty properties. 

Generation Rent said: “The failure to build enough homes in recent decades has left the country unprepared for the huge spike in demand since the end of restrictions. The failure of the welfare system to respond to rising rents has left renters on low incomes even more exposed to the cost of living crisis.” 

According to figures shared by the lender, the company paid out on 92 per cent of its new claims received from members.

Around 40 per cent of claims were due to musculoskeletal conditions, 16 per cent were attributed to Covid-19 and hip or knee conditions came to seven per cent.

The lender made 1,336 final decisions in claims in 2022, which is higher than 1,318 decisions recorded in 2021.

The insurer did not pay out 107 claims, with the main reason for rejection attributed to misrepresentation where questions were not answered correctly at the point of application.

The average age of claimants was 36-years-old on its income first product, compared to 48-years-old for legacy products.

The firm said that this showed how income protection was being increasingly used by younger workers to provide financial security.

Claire Hird, The Exeter’s customer service director, said: “Whilst it’s important to share our income protection claim statistics with the market, it’s just as important to remember that behind every claim there’s a member; someone who has looked to us to provide support and reassurance during a difficult time.

“In 2022, we assessed over 1,300 claims from our members, each of whom is an example of how illness or injury can impact our ability to earn a living.

“With the average income protection claim for both limited and full-term benefit policies lasting almost 90 weeks, and our longest claim being paid for over 25 years, our statistics show the vital role that income protection insurance plays in giving our members peace of mind and financial security.”

Vikki Jefferies, Primis’ proposition director, added: “The figures announced by The Exeter today highlight the necessity of protection insurance for people of all ages and demographics, and particularly for homeowners who would otherwise be left unable to make mortgage payments.

“The numbers above clearly demonstrate The Exeter’s commitment to making sure their clients are supported when they most need it, something that greatly aligns with our goal at PRIMIS of ensuring our proposition provides quality protection products and services for both AR brokers and their customers.”

While there were plenty of hurdles to overcome in 2022, the bridging finance market has shown steady growth throughout the year, which is brilliant. Moving forward, we see no sign of this slowing down.

The impact the wider economy has on the bridging loan industry is huge. The cost of living crisis and rise in inflation rates has left a massive imprint on the property market, with many investors going to bridging finance as the recession looms over the economy. Therefore, the importance of bridging lenders providing affordable options has never been so important.

Innovation, flexibility and speed will continue to be key in the bridging market this year to ensure brokers and their clients can take advantage of market conditions and secure investment opportunities in a tight timeframe.

Fixed rates will grow in popularity

Security will also play a crucial role. Owing to the current economic climate, many borrowers are demanding the comfort that their loan rates are fixed for the term of their loan.

There are many reasons for this: 1) Protection: borrowing at a fixed rate means one less thing to worry about and profit margins can be protected. 2) Budgeting: once a borrower has locked a rate in, they will know how much needs to be repaid over the course of their term and even if interest rates suddenly spike, their repayments remain the same. 3) Capitalisation on low interest rates: with it looking like interest rates are only going to continue to rise throughout 2023, taking out a loan at the time when they are lower, means the borrower will be able to lock in a cheaper rate for a period of time, which could reduce the overall cost of their loan.

Taking the above into consideration, it is clear why borrowers have and will continue to look for lenders who can provide fixed rates in 2023.

It appears we are in for a rocky road ahead, however there is always an opportunity to overcome any challenges presented. This is why last year we introduced our fixed rate scheme, the Hope Guarantee, which provides broker’s clients with much needed security.

This involves borrower’s rates being fixed for the term of their loan, as soon as Hope Capital’s solicitors have been instructed providing there are no material changes to the application or loan, regardless of increases in the Bank of England base rate.

In addition, we will also continue to regularly review the market to ensure we are delivering solutions to meet brokers and borrowers’needs, while standing out in this ferocious market.

Raising bridging awareness crucial

Furthermore, another element which will remain key in 2023 is the importance of raising awareness of what bridging loans can offer.

Although the specialist lending industry is notably increasing in popularity with brokers, there are still a few myths about bridging finance lingering, e.g. bridging is an expensive option and should therefore be seen as a last resort or this type of loan is only suitable for residential property purchases.

The reality is that bridging finance is far more affordable than you think and can be used for a range of opportunities which require immediate funding, including commercial properties, semi-commercial schemes, land deals, etc.

Not only does bridging finance enable borrowers to access finance rapidly, it also has many other advantages including customised solutions, because each loan is evaluated on its individual merits, i.e. a personalised solution can be found.

In addition, bridging loans also provide flexibility, as most bridging lenders are not bound by the restrictive loan conditions other traditional finance options are tied to.

Nevertheless, the misconceptions surrounding bridging loans are at times responsible for putting brokers off which is why it will continue to be important for education and awareness to be generated around short-term loans in 2023.

Reflecting on 2022, of course there were challenges to overcome and a great amount of uncertainty, but by no means was it a disastrous year for the bridging finance industry. In fact, a level of opportunity was created to meet the new demands and needs of investors and developers looking for fast and accessible finance solutions in certain areas.

Looking ahead, we feel very confident that the bridging market will continue to boom. That said, there is undoubtedly a lot to come in 2023 and it is therefore the responsibility of lenders to listen to the market, deliver competitive finance products and be at the forefront of raising awareness of the benefits the short-term lending industry can provide.

I joined Paragon in January 2020 and to say a lot has happened since then is quite an understatement. 

Coming into this role, I wanted to build on the work of my predecessor, John Heron, who had orchestrated Paragon’s growth into one of the leading specialist buy-to-let lenders. But, as we know, it was around this time that Covid hit, and the focus shifted to supporting our staff and customers through this extremely challenging time.  

Working through crisis 

There’s a saying about never wasting a crisis and Covid tested us. The extra operational pressure that the pandemic brought helped us to identify areas that we could enhance while proving that we could be agile and bold in our decision making. 

This gave rise to a far-reaching digital transformation project with transparency and consistency at its core, both facets of the customer journey that were now more important than ever.  

Processes were redesigned to deliver service improvements quickly. We enhanced areas that were not tech dependent, while investing in our people through recruitment and development of the talent we already had.   

Knowing that the next few years would see a rise in customers reaching mortgage maturity, we worked to overhaul the entire remortgage process. Application to offer time was reduced from in excess of 40 days to just a few and a process to automatically authorise further advances with selected customers was developed. 

With rising rates leaving borrowers facing substantially higher mortgage repayments than those of the five-year fixes they were coming off, this work took on extra significance so it was great to be on the front foot in supporting customers. 

Last year, this helped us increase buy-to-let lending by 18.2 per cent to £1.9bn and with 2018 seeing substantial volumes of five-year fixes written, we anticipate remortgaging accounting for a high proportion of lending this year too.  

The progress we’ve made over the last few years means we’ll be well-positioned to support remortgage customers, particularly those with four or more properties or homes in multiple occupation (HMOs) in their portfolios and landlords operating through limited companies due to our increased focus on professional landlords.   

A sense of pride 

I’m proud of how we’ve responded to all of the challenges that the last few years have thrown at us and how we have been at the forefront of the market.  

Examples that spring to mind include being amongst the first specialist lenders to offer preferential rates on properties with EPC ratings of A to C and to reduce interest coverage ratio (ICR) calculations to enable borrowers to continue investing following the mini Budget.  

Our manual underwriting, where each application is individually assessed by a skilled member of our team, will remain but we’re removing what I call the ‘heavy lifting’. Technology will reduce the resource needed to carry out time consuming tasks such as finding and inputting information.  

This will free up the capacity for our people to use their expertise to find solutions to some of the most complex cases. 

While stringent, our approach to underwriting has resulted in a book that benefits from a strong credit rating and has around 98 per cent of loans classified as specialist. We’ve carved out our niche, thriving in the specialist lending space, and the ability to lend where others can’t means we are well equipped to continue to support much needed investment in the private rented sector, as important now as it has ever been as the UK enters a period of recession. 

Wider industry work 

Looking at financial services more broadly, I’ve worked to see positive change in diversity and social inclusion within the industry.  

It has been fantastic to be involved with all of the great work of the City of London’s Socio-economic Taskforce, becoming a board member of Progress Together.  

Mortgage Solutions has hosted a number of events that help us explore how we can create a more diverse and inclusive financial services sector, where people progress based on merit, not fit, and I’m keen to build on the progress that has been made so far. 

The conflict in Ukraine, rising commodity prices, supply chain challenges and of course rising interest rates; rising somewhat a little faster more recently than had been expected. 

The art part of valuation really comes to the fore in times like these. The skills we have allow valuers to interpret market events. We use the widest range of information available to then decide and advise the client on the all-important pounds, shillings and pence, and label it as value.  

But casting our minds back to the immediate aftermath of the Covid lockdown, when the world closed down and material valuation uncertainty was declared. Are we at the same point in the valuation journey? Are we in materially uncertain times or is it just that the market is uncertain, and merely reflecting what markets do? 

That is to fluctuate and reflect what is happening around it. After all, markets are rarely certain. 

A rare occurrence

To declare material valuation uncertainty is a significant event in itself, let’s not be under any illusion; it has rarely happened at all since the valuation rule book was created. It is a powerful tool in the valuer’s armoury but equally it is a very powerful statement, in both the positive and the negative. Possibly a tempting safety blanket but its use must be appropriate to the circumstances and introduced only after careful consideration and, dare I say, with much caution. Sometimes markets react in ways even the most informed would find unusual.  

So, where are we? Materially uncertain or just uncertain? 

To a large extent, the answer lies in the definition of material valuation uncertainty – which is essentially a significant market disruption from unprecedented and unforeseen events, whose occurrence coincides with the valuation date, creating a lack of empirical data leading to a sufficient and significant lack of certainty around the valuation figure.  

A global pandemic and global lockdown were significant and unforeseen. They coincided with the valuation date and the evidence used within a valuation journey in March 2020 came from a different time and market. A time when the markets were operating freely, without restriction and without uncertainty – few could predict whether the exit pricing point in March 2020 would be the same as the entry pricing point when the markets were allowed to reopen.  

On that basis, I would suggest, not many would disagree that events in March 2020 created material valuation uncertainty. 

Current market conditions 

Are we in the same type of territory now? Let’s step back to evaluate this thoroughly. The market is open, it is fully functioning, finance is available, property continues to transact and a supply/demand imbalance still exists.  

We are indeed in uncertain times but is it material in the valuation sense?  

My view is no; events have not created a materially uncertain market. Markets are inherently uncertain, markets rarely follow a consistent and constant path and that is what we are seeing now, an uncertain market, just on a larger scale. And as said earlier, it is when markets fluctuate (which they do) that the valuation profession is needed more than ever.  

At Countrywide Surveying Services, we are continuing with our holistic, wrap-around support to all our clients, helping them to navigate through these unusual times. 

We are providing the best advice possible to ensure the valuation is the right one from the right type of valuation product and that the all-important pounds, shillings and pence, are reflective of the true value of the asset. After all, this is what we are here for – to value as at the date of valuation using the widest range of information available.  

That way we also continue to support the market, to reflect the market and most importantly, not to cause unnecessary disruption or uncertainty. 

Brendan Michael Gaughan, 40, from Glasgow was director of three separate property management companies: Gaughan Group, Gaughan Property and Rentl Property. All three were incorporated in February 2020 and had conducted no business until April 2020, meaning they were not eligible for funds through the Bounce Bank Loan scheme.

None of the firms qualified for loans ‒ these were only available to those that had been doing business on 1 March 2020. However, Gaughan Group received a loan of £50,000, as did Gaughan Property, while Rentl Property received a loan of £35,000.

The funds were all transferred into a single account and used to buy a property worth nearly £160,000 in August 2020. That property was then sold for just over £140,000 in March 2021, with £100,000 of the proceeds transferred into Gaughan’s personal account.

The three businesses were all put into liquidation on the same day, 11 October 2021, which triggered an investigation by the Insolvency Service.

Gaughan did not dispute that the companies were ineligible for the loans. He has been banned from being involved in the promotion, formation or management of a company, without the permission of the court, for 12 years.

Steven McGinty, investigation manager at the Insolvency Service, noted that the Bounce Bank Loans had been set up to support trading companies which had been adversely affected by the pandemic.

He continued: “Brendan Gaughan should have known his companies weren’t entitled to the loans yet he took them anyway and used the funds for personal gain. We will not hesitate to take action against directors who have abused Covid-19 financial support like this.”

Previous reports from the National Audit Office have warned that the government may lose as much as £26bn as a result of fraudulent Bounce Back Loans.

While global economies are recovering, as many countries bounce back from the pandemic, there are still significant challenges presenting themselves.  

There have been notable periods in history where interest rates have been much higher, but with rates remaining so low for so long, we are now seeing the impact and I think this will continue for an extended time. 

On 4 August 2022, the Bank of England (BoE) raised interest rates to 1.75 per cent, which was expected. It was the sixth consecutive interest rate increase and the biggest single one for 27 years, as the UK’s central bank grapples to bring inflation back below its target of two per cent.  

With other central banks increasing rates, this trend is set to stay for the foreseeable future. The challenge for many is, not only are borrowing costs increasing, but household budgets are coming under significant pressure as the cost of living continues to rise sharply. 

Some commentators are predicting that the UK is facing a tougher ride because households are more exposed to energy price increases and have less government protection than in other countries.  

What next for interest rates? 

The notion that interest rates will creep up is not new.  

There was a lot of speculation in 2015 that they would increase, but inflation dipped, so rates stayed the same. The BoE was so concerned around the EU referendum in 2016, that it dropped interest rates. Pre-Covid, the BoE started to raise interest rates to 0.75 per cent in 2018, but then cut rates to 0.1 per cent.  

As a population, we enjoyed borrowing cheaply in the years that followed 2007 to help stimulate the economy and reduce borrowing costs. These times are over for a little while as the Bank of England forecasts it could raise interest rates to three per cent in Q3 2023. 

What else could impact the level of interest rates? 

• Covid-19 disruptions 

As borders reopened and demand for goods and services resumed, supply chains have been significantly squeezed by shortages throughout the process. The knock-on effect is delays and price increases that are ultimately fuelling inflation rises. 

• Inflation  

Inflation is significantly above the BoE’s official target and still climbing. It’s now at 9.4 per cent, which is the highest level for 40 years and predicted to rise further to 13 per cent by the end of the year, and may soar further because of greater energy costs. 

• Change in the Bank of England’s approach 

The Bank of England monetary policy committee’s support for low interest rates has disappeared, even though it is unusual to increase interest rates when there is a risk of recession. 

• Economic challenges 

The UK economy post-Covid is heading for a recession. During the pandemic, the UK economy shrank by 9.9 per cent, but then rebounded to post-Covid levels in 2021.  

However, the war in Ukraine has placed significant stress on energy and food costs, which significantly increased costs leading the BoE to predict (and pretty much confirm) the UK would enter recession by the end of 2022 that would last for over 12 months. 

Additionally, unemployment has risen for the first time in a year. 

UK economic growth forecasts are being changed and the Bank of England believes that the UK economy will contract by 1.25 per cent in 2023 and 0.25 per cent in 2024. 

Mortgage interest rates are already shooting up. Whilst numerous borrowers are on fixed rate mortgages now, as these products mature, the rates available will be significantly different than they are used to. With higher borrowing costs, coupled with the spiralling cost of living individuals are already experiencing, this is just extra pressure on household incomes. 

All forecasts indicate that the Bank of England will continue to increase interest rates over the next 12 months as the UK wrestles with increasing energy costs, post-Covid challenges and global events that impact us all.  

We’re likely to be in for a bumpy ride, strap yourselves in. 

Joint research carried out by the firms analysed data from the Bank of England NMG’s survey and the Wealth and Assets survey.

The research predicted that the total amount of debt owed by the over-55s would rise to £294bn this year, up from £272bn in 2021 and £209bn in 2017.

This would amount to a 41 per cent increase in five years and is expected to rise to £402bn by 2032, a surge of 92 per cent in just 15 years.

Most of this debt is held by those aged between 55 and 64, who are still working while repaying mortgages and supporting children.

The total debt held by this group is expected to rise from £196bn in 2021, to £210bn in 2022. Half of 55 to 64-year-olds said they were currently in debt or had been in the past five years, equating to 4.4m people.

Unsecured debt amongst the over-55s grew from less than £20bn in 2015 to over £25bn in 2019 but contracted slightly between 2020 and 2021 as a result of the pandemic.

The research predicted that unsecured debt is likely to rise by over a third in 2022, reaching £20bn, as the cost-of-living crisis drives many to borrow to make ends meet.

Almost 40 per cent of retirees said they have spent more than they receive in income in some months in 2022, with eight per cent saying this often or always happens.

Credit card debt

The average credit card debt of those with debt stands at £2,800 and other types of unsecured debt levels are expected to reach an average of £10,700 per individual with debt.

More than one in five, 22 per cent, of over-55s revealed they had credit card debt in the past five years which they had not paid off in full each month, equating to 4.7m people.

The second most common type of debt was an overdraft, with nine per cent saying they had used their bank account’s debt facility to fund additional spending.

Dave Harris (pictured), chief executive at More2Life, said debt was a fact of life for many people.

He added: “However, with 40 per cent of retirees already finding that their monthly outgoings outweigh their income, it is likely to quickly become a burden for some as the cost-of-living crisis continues.

“Over-55s are expected to borrow £22bn more than they did last year which is likely to be driven by higher interest rates and rising inflation. Servicing this borrowing will have an impact on those older people who are already on fixed incomes and may be providing some financial support for their families.

“While individuals need to consider how best to manage their own finances as they get older, it is vital that they consider all their assets. Living in a property you own but being too scared to turn the heating on and dreading a visit to the supermarket makes no sense at all.

“Specialist advisers are ideally placed to help people explore all their options and understand whether a later life lending product such as equity release might be the support they need.”

The committee has begun to plan the process of selling UK government bonds, currently held in the Asset Purchase Facility, later this year. 

Global inflationary pressures have intensified due to the Russian invasion of Ukraine, with energy price increases at the core. Pressure on supply chains is also being felt due to the war, as Ukraine and Russia are both producers of key imports such as metals and fertilisers. Supply chain pressures are also being felt due the Covid-19 resurgence in China, with their Covid Zero policy meaning many cities have been in lockdown since the end of March. 

Inflation continues to rise, reaching 6.1 per cent in February and increasing to seven per cent in March, higher than expected in the February report. Inflation is now expected to reach over nine per cent in Q2, and to average just over 10 per cent at its expected peak in Q4 of this year. This is largely due to the Ofgem utility price cap increase in April, with a further increase of up to 30 per cent expected in the October review. 

Looking further ahead, inflation is expected to decrease materially once energy prices stop rising, however the inflation target of two per cent is not expected to be met for over two years. 

UK GDP growth has slowed and was 0.1 per cent in February with consumer confidence falling due to the squeeze on household disposable incomes. 

The latest Office for National Statistics (ONS) figures continue to show unemployment decreasing, down to 3.8 per cent in the three months to February, however the number of job vacancies in January to March 2022 reached a record high of 1.288 million.

Although we continue to see unemployment decreasing in the near term, it is expected to rise to 5.5 per cent in three years’ time with slower economic growth. Regular pay (not including bonuses) increased by four per cent from December to February, however once adjusted for inflation sat at -1 per cent on the year, showing inflation is causing an overall reduction in regular pay on households.

* Using OIS Curve [rounded to two decimal points] 

**Based on the swap curve 

Due to the continued rise in inflation, markets are expecting further steep increases in the Bank of England base rate with large increases throughout the rest of this year, exceeding two per cent within six months. Markets also expect that the bank rate will increase to over 2.5 per cent within the next 12 months.  

Market participants also expect the two-year swap rate to increase further over the next three months and to then flatten out, with the three-year swap rate following the same path.  

The five and 10-year swap rates have slowly been increasing, but are expected to remain relatively flat over the next 12 months, then to drop slightly in the next two to three years. 

UK securitisation market 

Issuances returned into the primary market this month, after an eight-week break due to the geopolitical climate, with four transactions pricings; one from a prime lender and the other three from non-conforming and buy-to-let shelves. 

Currently, in 2022, circa £14bn of UK residential mortgage-backed securities (RMBS) paper have been placed into the market compared to circa £7.6bn this time last year, and around £6.3bn in 2020. 

That’s according to new analysis from the Office for National Statistics ‒ based on data from 2019 ‒ which found that for towns within approximately 200km of the capital saw prices drop by around £50,000 average for every 50km further away they were. 

The relationship was confirmed as towns located around 18km from London had average house prices of £416,800, dropping to £359,000 for towns 50km away, £288,500 for towns 100km away, and £241,000 for those around 150km from London.

The ONS suggested this distance threshold may represent the furthest people are able to commute to work in London.

The other crucial characteristics influencing property prices were the types of jobs carried out by locals, and the level of income deprivation within the town itself. 

A link was found between house prices and the percentage of people in the town employed in higher skilled jobs. Using the skill levels defined within the UK Standard Occupation Classification, for every 10 percentage points of people in jobs in skill level four ‒ classed as those in professional occupations and high level managerial positions ‒ the ONS found average house prices increased by around £20,000.

There was also a strong negative trend, with the proportion of residents employed in skill level two jobs. These include professions such as machine operation, retailing and clerical jobs.

The ONS found that for each 10 percentage point increase in local people working in skill level two jobs, average house prices dropped by around £20,000. However, it noted that this link weakened when higher numbers of people in the town were employed in these jobs.

Rounding out the top three was income deprivation, which the ONS said had a “strong” link with house prices. It found that the average property price dropped by around £10,000 for every five percentage point increase in deprivation level.

The pandemic has changed the game

Andrew Montlake, managing director of Coreco, argued that the property market today is “fundamentally different” to 2019, noting that while proximity to London is still important, the pandemic has “changed the rules of the game” when it comes to prices.

He continued: “London will always be the nexus of the UK property market but with the shift to homeworking and the race for space triggered by the pandemic, proximity to the capital just doesn’t count in the way it used to.”

Montlake suggested that in future, towns that are a greater distance from the capital may begin to outperform “as the race for space continues”.