According to the Bank of England’s Money and Credit report, gross mortgage lending fell to £25.4bn from £28.1bn in May. Gross repayments also decreased to £20.3bn from £21.2bn over the month.
Net borrowing of mortgage debt also dropped, from £8bn in May to £5.3bn in June. However, this remains above the pre-pandemic average of £4.3bn in the year to February 2020.
Typical slowdown
It was noted by industry figures that it was expected for activity to slowdown in the summer months as people went on holiday.
Simon Webb, managing director of capital markets and finance at LiveMore Capital, said: “The drop in mortgage borrowing by some £2.7bn heralds the move towards the slower time for house purchases during the summer months.”
John Phillips, national operations director at Just Mortgages, said: “Although this may at first seem like a significant fall in net lending in June, we should remember that there was a considerable spike in May and volumes are still well above the pre-pandemic average.
“We are expecting borrowers’ ability to satisfy lenders’ affordability rules to be affected by increases in household spending on fuel, food and energy but this has yet to materialise is any significant way and there is still an appetite from borrowers to secure a deal before further rate rises. However, completion times are being stretched and so we should expect a lag in housing transactions over the coming months.”
Geoff Garrett, director of Henry Dannell, said: “A previous flurry of spring mortgage market activity had reversed the steady decline in mortgage approvals seen so far this year, however, it seems as though this has been short-lived, and the latest figures once again show a reduction in buyer appetites with approvals reaching their lowest point since June 2020.
“It’s likely we will now see mortgage approvals see-saw marginally up and down from month to month as a result of seasonal influences, but we expect to finish the year at a much lower threshold when compared to the unusually high records set during the pandemic.”
Approvals fall as rates climb
Approvals for house purchases fell to 63,726 in June, from 65,681 in May which the central bank noted was below the pre-pandemic average of 66,700 in the year to February 2020.
Remortgage approvals for borrowers switching to a new lender also dropped to 44,049 from 47,244 in May. This is also below the pre-pandemic average of 49,500 in the 12 months to February 2020.
Webb added: “Combined with a drop by 2,000 of approvals for house purchases, these reductions may also reflect a growing nervousness in the market as interest rates rise.”
The effective interest rate on newly drawn mortgages rose 20 basis points to 2.15 per cent in June, while the rate of outstanding mortgages ticked up by four basis points to 2.11 per cent.
Mark Harris, chief executive of SPF Private Clients, said: “While there are still signs of strong activity in the housing market, it is noticeably calmer than the frenzy of last year. With the effective interest rate on new mortgages rising by 20 basis points to 2.15 per cent in June, it is no surprise that mortgage brokers remain busy. Borrowers are worried about rising rates and are keen to secure a fixed-rate mortgage before they become more expensive.
“With the money markets pricing in another rate rise at August’s meeting of the Monetary Policy Committee, there is some urgency to lock into the best deals.”
It’s the first such facility that the broker has launched in the north of England. Previously, if an adviser wanted to join the Just Mortgages Self-Employed division, they were required to travel down to Northamptonshire for the face-to-face sections of their induction training.
The firm said that the northern expansion reflected the growth and success of the business, noting that it now has more than 600 advisers working on either an employed or self-employed basis.
In order to support the new training location, Tom Bell has been appointed to the role of training manager, with specific responsibility for the northern areas of the UK. Bell previously spent three decades at TSB in a range of roles.
Laura Hide, senior training manager at Just Mortgages, said that the new training centre would be more “inclusive and convenient” for broker applicants based in the north.
She added: “We have been offering workshops and one day sessions in the north since restrictions were relaxed and the success of these has driven our increased commitment to the region and to ensure courses are more accessible.”
Ashley Edwards, regional director for Just Mortgages, emphasised that there were a lot of “talented, passionate and driven” people in the north who would do a wonderful job running their own broker business.
“It’s important they start their journey with us on the right foot and as prepared as possible. The location of this training is vital and we are delighted with the facilities and comfort that we can now provide,” she continued.
Last month Just Mortgages announced the launch of a blended learning CeMAP course, bringing together both face-to-face and remote sessions.
The partnership is through Openwork Conveyancing and brokers will also be able to use features like DigitalMove, which digitises the homebuying and selling process.
Another feature is Rapid Remortgages, which aims to make a remortgage as fast and easy as a product transfer.
Brokers will also be able to choose an enhanced SpicerHaart Conveycing option called JM Legal, which uses eWay case management tool. It provided electronic quote, instruction and advanced case tracking.
This Spicerhaart option has 10 conveyancers on its panel.
Karen Rodrigues, sales director at Econveyancer, said she was delighted to launch this new panel management partnership with Just Mortgages.
She said it took a “rigorous approach” to maintaining the quality of the Econveyancer panel and it was “closely monitored to ensure unwavering high standards”, and this was especially important due to high volume of property transactions.
“This is especially crucial in new build where time is often of the essence. We know that conveyancing is such an important part of the mortgage process and can play a crucial role in a client’s experience, we therefore continue to invest in the ongoing development of Econveyancer to ensure we continue to enhance that experience,” Rodrigues noted.
Carl Parker, national director of the self-employed division at Just Mortgages, said: “Conveyancing is an element of the homebuying and advice process that can cause the most stress and headaches, so we have teamed up with the team at Econveyancer in order to smooth out this process. At the same time our SpicerHaart offering has also improved.
“This is a valuable expansion of the service and support that our self-employed brokers enjoy as a part of the Just Mortgages family which should make our advice process more seamless than ever. This makes life easier for our brokers and their clients.”
The Colchester-headquartered firm has 618 brokers and claimed it was on target to reach its goal of recruiting 1,500 brokers by 2027; a total which it said will be comprised of 1000 self-employed brokers, 425 employed and 75 wealth advisers.
Just Mortgages operates throughout the UK, selling both mortgages and protection. Its brokers offer independent mortgage advice in addition to other financial solutions. It offers advice on mortgages including buy-to-let and new build products.
Just Mortgages said it aimed to become one of the largest mortgage broker firms in the UK by attracting brokers already in the industry but that expected most growth would continue to come via its academy initiative.
Just Learning, which launched earlier this month provides blended learning and is a standalone proposition. Those who graduate will be offered an interview with a sales manager to discuss joining Just Mortgages on an employed or self-employed basis.
Just Learning focuses on the CeMAP 1 qualification and includes in-depth sales skills and client management training. It is structured over two weeks which can be taken either together or at different times.
John Phillips (pictured), national operations director at Just Mortgages said: “The recruitment team just deliver month after month, and we are thrilled to welcome new brokers to the Just Mortgages family.”
He added: “Once brokers are qualified that is very much the beginning of the journey with us, not the end. Their success is our success, and it is our job to provide brokers with the tools they need to deliver the best possible service to their clients. Over the next few years as rate rises and cost of living begins to bite into household budgets, the value of advice will increase substantially.
“We are going to play our part in ensuring that there is a strong and professional mortgage advice sector to help individuals and families with their borrowing and protection goals.”
That’s according to new data from Leeds Building Society, based on the experiences of its own borrowers.
It found that last year the average price of a property bought by a shared ownership borrower with the mutual was nearly a third more expensive than those with members who bought their first property without using the shared ownership scheme.
For example, in Greater London the typical shared ownership purchaser needed an average deposit of £11,024. By contrast first-time buyers using mainstream deals needed a deposit more than 10 times larger.
This was not limited to the capital. In the South East, the average deposit for mainstream buyers was 6.7 times higher than shared ownership borrowers, ahead of the South West (6.3 times), the North East (5.7 times) and the West Midlands (4.8 times).
What’s more, the average age of first-time buyers using the shared ownership scheme was 4.6 months less than those relying on mainstream mortgage products.
Martese Carton (pictured), director of mortgage distribution at the mutual, noted that as the gap between incomes and property prices grows, affordable housing schemes are crucial to keep home ownership affordable.
She continued: “We believe there’s a lack of supply of shared ownership properties, which have the potential to help many more first time buyers. We’d like to see greater government support for increasing the supply of affordable housing.
“We’re always looking for ways to widen access to home ownership so we’ll continue to monitor trends closely to ensure our products and lending criteria are meeting borrowers’ needs.”
Recent research from Just Mortgages suggested that use of shared ownership schemes is set to grow, though greater awareness and understanding of the scheme is needed.
According to UK Finance’s latest household finance review, homemover numbers in Q1 2022 were 42 per cent lower than the same period last year and first-time buyer numbers were 12 per cent down.
This was attributed to “unprecedented volumes” at this time last year due to the stamp duty holiday, therefore the drop-off was expected after its phasing out.
The report said the number of mortgage applications submitted in Q1, most of which are expected to complete in Q2, were two per cent greater than the same period last year. It said this growth was due to strong remortgage activity.
It continued that it expected “relatively robust” house purchase activity in Q2 but it would show a year-on-year decline given the strong activity last year.
UK Finance said first-time buyer activity was trending above pre-pandemic levels but the outlook for 2022 was unclear.
It explained that as first-time buyers tended to be younger and lower on the income scale, there could be “greater downward pressure” on this group from cost of living crisis.
The report said tax increases and rising inflation had not yet fed through into mortgage completions but “material changes” such as energy bills and tax changes, could start to feed through in Q2.
Disposable income will contract for mortgage households
UK Finance said the average mortgaged household would experience a three per cent fall in the amount of disposable income left after mortgage, credit commitments and living costs.
It said this would have a “relatively modest impact on effective demand” and the average affordability assessment would only experience a “small downwards impact”.
UK Finance continued that the average borrower had over half of their net income to spare after subtracting all these items.
It added that the cost of living crisis would be felt most acutely in the lower-income brackets as people in this bracket have around half the spare income compared to those in higher brackets.
However, it said most borrowers across all income brackets would have a “good proportion of income” and would still qualify for mortgage credit as they did last year but those at the margins would struggle.
Product transfers most popular remortgage option
The report said the proportion of total remortgages where extra money was taken out has fallen to 50 per cent, which is the typical level since 2012.
It said that over the past two years, equity withdrawal in total remortgage activity had risen.
UK Finance added that internal product transfers dominated activity, with eight in every 10 customers taking a product transfer with their current lender.
It said the split between product transfers and external remortgaging was “erratic” as it was influenced by fixed rate maturity schedules and retention strategies.
However, UK Finance said product transfers had started falling to pre-pandemic levels, but they were still the preferred option.
Equity withdrawal for home improvements ‘significantly elevated’
The report said that equity withdrawal was returning to pre-2020 levels and that the amounts taken out for home improvements were “significantly elevated”. It explained that this reflected inflation and growing cost of labour and materials.
“These increased costs are likely to keep the pound values for remortgage activity higher, particularly whilst the current Covid-triggered wave of improving and adapting living spaces persists,” it said.
It added that it had not seen a “material increase” in money withdrawn to consolidate more expensive debt into a mortgage, although average amounts have been slowly trending upwards, which reflected inflation.
UK Finance said this showed that cost of living increases had yet to feed through into the build-up of unsecured debt.
Arrears continue to fall
The report continued that arrears had fallen in Q1 this year to 81,480, which compares to 85,610 seen at Q4 last year.
It said as arrears took time to accrue, it did not expect rate increases to feed through into arrears until the end of Q2, and noted that mortgage pricing still remained low by historic comparisons.
It added that heavy arrears fell by 650 cases to 31,070 and this was the first quarterly decrease since Q4 2019.
The trade body said this had been rising since the start of 2020, partially due to the possessions moratorium as cases that would have gone through this process remained in arrears .
It noted that this fall could be an “early indication” that the backlog of possession cases had started to clear, but further data was needed to confirm this.
Possessions came to 980 in Q1 this year, which UK Finance said was well below typical levels.
It added that it expected possessions to rise to 7,700 as the backlog was cleared but this was still low compared to historic standards.
UK Finance said that as it took time for heavy arrears to build up and had longer processing times in the courts, it would not expect material umbers of new possession cases until the end of 2023 at the earliest.
Brokers say effect of cost of living still feeding through
John Phillips, national operations director at Just Mortgages, said the report confirmed a “stable start to the year” as application activity was similar to pre-Covid levels and feedback from brokers suggested that remortgaging remained strong.
He said: “However, what these figures don’t yet show is the recent shake-up in household budgets with interest rates, fuel, energy, and food costs all rising steeply and eating away at take home pay especially for lower-income families and typically first-time buyers.
“The chancellor has warned that interest rates are expected to rise to 2.5 per cent by the end of the year and with the cost of living rising rapidly, complying with affordability conditions will become increasingly difficult. Our brokers tell us that competition for houses remains very high and borrowers’ key concern is securing a mortgage offer and having the ability to proceed when they find the house they want.”
He said that in the latter half of the year, mortgage demand should remain strong as borrowers aim to secure a competitive purchase or remortgage deal before further rate rises. He said speed of offer could become more important than rates for some borrowers due to housing stock issues.
Emma Hollingworth, distribution director at MPowered Mortgages, said it was no surprise that house purchase borrowing dropped in Q1 given the high levels of activity seen in 2021.
She said: “While rising mortgage rates and the rising cost of living have had some impact on the appetite of those looking to buy or move home this year, consumer demand for housing remains strong. Unfortunately, the window of availability on mortgage deals is now shorter than it has ever been before, averaging just 21 days.”
She added that it was an “increasingly challenging market for homebuyers” and it was important that as an industry it supported customers. She noted that research done by the firm showed customers valued better service over rate, and more could done to improve the mortgage process.
The training provider is a standalone proposition but has the backing and support of Just Mortgages.
Those who graduate will be offered an interview with a sales manager to discuss joining Just Mortgages on an employed or self-employed basis.
Just Learning focuses on the CeMAP 1 qualification and includes in-depth sales skills and client management training. It is structured over two weeks which can be taken either together or at different times.
In addition to passing the CeMAP 1 qualification, participants will be taught practical skills, including how to obtain and retain clients, creating rapport, and understanding and satisfying client’s needs.
E-learning and mortgage advice
Just Mortgages said it was these “real world” skills that would set Just Learning apart and that was no application process, anyone wanting to join can sign up to the course with their own funding to guarantee a place.
Courses will take place every month in a range of locations across the UK and will offer face-to-face learning supplemented with additional digital content for complementary e-learning.
Rodney Sloan (pictured), head of training for Just Mortgages, said: “The financial services industry has not always been great at attracting new blood, but we aim to change this by offering a route to a new career and not just a new qualification.
“The CeMAP 1 qualification is of course the bedrock of a new adviser’s career, but often the newly qualified have a shiny new certificate on the wall but no idea what to do next or how to attract clients. One of the key outputs of Just Learning is that participants will graduate not just with theoretical knowledge but practical skills to set up and thrive in their new career. For many graduates this will be a new career in a new industry and an exciting new chapter of their life.”
The charity was set up in 1998 by Alick Smith, who at the time was the chairman of Spicerhaart, the property group which Just Mortgages is a part of.
The charity supports 13 children’s hospices across the country which are near to the estate agency’s branch network. This allows staff to visit the sites and see the results of fundraising efforts.
The charity was formerly known as the Fantasy Charity Fund and has raised over £1m since its foundation. It pays for children from the hospices to go on trips to Disneyland Paris with their families and any additional funds are used to provide equipment.
The contribution from Just Mortgages will go towards the charity’s annual fundraising target of £75,000.
John Phillips (pictured), national operations manager at Just Mortgages, said: “This is a wonderful charity and one that is close to our hearts at Just Mortgages and the wider Spicerhaart family.
“Even in the midst of great pressure on individual finances, staff have once again shown an amazing commitment and dedication to fundraising and their individual generosity and generosity of spirit will make such a difference to the children supported by Magic Moments.
He added: “It was a tremendous honour to be able to announce at our annual conference that we are going to be able to present a cheque of £20,000 to the charity. I am hugely proud of all our staff and also humbled by the wonderful work done by the team at Magic Moments.”
John Phillips, national operations director at Just Mortgages, said that the 0.25 per cent increase “came as no surprise to anyone” as the chancellor had warned rates could hit 2.5 per cent by the end of the year.
Phillips said that along with the cost of living crisis, the rate rise could mean pressure on household budgets will become the “greatest it has been for a decade.”
“While consumers have little control over their energy bills, they do have the opportunity to secure long term security in the form of a fixed rate mortgage. As a result, our network of mortgage advisers report that conversations with borrowers around longer-term fixed rates have never been higher,” he explained.
Colin Bell, co-founder and chief operating officer of Perenna, said that lenders had pulled 500 mortgage products, and average two-year fixed rates had reached a seven-year high.
He said: “This is clearly having a detrimental impact on consumers’ ability to get onto the property market. Flexible long-term fixed rate mortgages can provide a solution to the problem, allowing individuals to better manage their monthly outgoings, while avoiding any unnecessary stress caused by multiple interest rate rises.”
Figures from Moneyfacts show that the price of a five-year fixed rate mortgage is 3.17 per cent, whereas the price for a 10-year fixed rate is at 3.21 per cent.
Rachel Springall, finance expert at Moneyfacts, said: “Fixing for longer may be a logical choice for peace of mind with mortgage payments when other household costs are increasing. The differential between the average two-year and five-year fixed mortgage rate is much smaller than in previous years.
“However, aspiring homeowners may need to rethink whether they can even afford to step onto the property ladder due to rising costs and soaring house prices.”
Simon Webb, managing director of capital markets and finance at Livemore, said that there has “never been a better time” for borrowers to take out a longer-term fixed rate mortgage, as there would be further base rate and inflation increases this year.
“This will give people peace of mind that their monthly payments will remain the same for the long-term fixed period they choose,” he said.
Variable rate borrowers should opt for fixed rates
Brokers said that the base rate hike will obviously impact those on variable rates, and urge these customers to switch to a fixed rate.
Richard Pike, director at Phoebus Software said that the price increases could impact one in five borrowers, or around 800,000 mortgages.
Springall said that the difference between and average two-year fixed rate and a standard variable rate (SVR) is 1.75 per cent. Switching could save around £4,611 over two years based on a £200,000 mortgage over a 25-year term on a repayment basis.
She added that a rise of 0.25 per cent over the current SVR could add around £695 to total repayments over two years.
David Hollingworth, associate director for communications at L&C Mortgages, said: “Borrowers wallowing on lender standard variable rates have the most to gain from a review of their mortgage.
“Not only could they cut the cost of their mortgage and breathe some added flexibility into their monthly budget, but they could also elect to fix their rate to protect against the potential for further rate rises.”
Mark Harris, chief executive of SPF Private Clients, looks at the raise as demanding an extra £250 a year for every £100,000 on a variable rate remortgage, which adds up.
He said that those on variable rates may want to consider long-term fixed rates as they were “particularly competitively priced” but warned that there could be “heft early repayment charges (ERC)” if a borrower wanted to get out of a deal earlier.
‘Stampede’ of remortgage activity
Others said that the decision to increase the base rate to one per cent today could further heighten remortgage activity to a “stampede”.
Simon McCulloch, chief commercial and growth officer at Smoove, said: “Today’s rate hike could see the present rush to remortgage turn into a stampede. We are already seeing a surge in remortgaging.”
He explained that in the previous quarter, legal instructions on Smooves platform had gone up 67 per cent year-on-year and were up 15 per cent on the previous quarter.
“Expect frenzied refinancing and a very busy time for lawyers and mortgage brokers as the rate hiking cycle continues,” he warned.
Pike said that those looking to remortgage could find themselves having to accept a higher rate.
He added: “Brokers could be approaching their clients earlier and advising them to apply for a new fixed rate which will be valid for three to six months, depending on the lender.
“By locking in to a lower rate now rather than waiting to apply when their current deal comes to an end, borrowers should end up with a better deal.”
Harris added that activity in the remortgage market was “brisk” and some borrowers were considering paying the ERC to leave their existing deal early before prices rise even more.
“This can be worth doing but it is important to ensure any savings you make to your mortgage payments outweigh the costs involved. Rates can be booked up to six months before they are required and we are getting a lot of interest from motivated borrowers in doing this,” he said.
The self-employed division now has 440 brokers, having grown from 300 in September 2021, and “just a handful” in June 2016.
The company credits its self-employed division’s growth to its support and advice provisions.
Alongside its training programme, Just Mortgages also provides a digital marketing package that helps brokers to generate leads.
The firm reports an overall UK staff of more than 580 mortgage advisers who sell mortgages and protection to first-time buyers, buy to let, and new-build borrowers.
Carl Parker (pictured), national director of the self-employed division said: “With enhanced support packages for new starters, a new legal offering and increased remuneration levels, we will continue to attract some of the best talent around.
“The training team provide expert tuition, advising the advisers on whatever area they need support and our support team will give advice on pulling together a business plan and ensuring the broker hits their targets.
“Our ethos is that our brokers are on their own, but not alone. Every broker is supported by the training team that provides expert insights, area and regional directors who help with day-to-day advice, and a marketing team who help brokers bring in new business.”
