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What does a slowing housing market mean for mortgage brokers? – Marketwatch

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  • 10/10/2018
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What does a slowing housing market mean for mortgage brokers? – Marketwatch
The national housing market have been slowing for some time, with subdued sales and lower price growth.  

Brexit and political and economic uncertainty are among the factors thought to be weighing on confidence and demand.

However, the picture is different across the country and market segments.

We asked this week’s Marketwatch panel for their view of the market and what a slowdown means for advice in terms of opportunities and challenges.

 

 

 Malcolm Davidson, director at UK Moneyman

September’s Nationwide price index reported “steady” growth, with much of the country flatlining.

But I was pleased to see my stomping ground, Yorkshire and the Humber, as the strongest performing region in England, up 5.8% on year.

Hull’s Green Port turbine blade factory and other offshore wind companies based in the area have led to a revival of the Humber (now dubbed the ‘Energy Estuary’), as several of the world’s largest wind farms go up in the North Sea.

With low average property prices and (slowly) increasing wages, Hull remains one of the most affordable places in the UK for first-time buyers to get on to the property ladder and to still be able to afford a good quality of life.

Whereas in some many parts of England it’s hard enough to buy a property with two household incomes, it’s fairly normal to see single mortgage applications in our area.

A two-bedroom apartment or Victorian mid-terraced property can cost less than £100,000, well within the reach of a sole applicant.

The stamp duty surcharge was not welcomed by northern landlords any more than those in the South but 3% of £75,000 is more palatable than 3% of £500,000, so while buy to let is not exactly flourishing, purchases continue to be made.

London is such an enormous market it’s understandable that much of the press coverage focuses on what’s happening down there but there are other parts of the country that are not as badly affected by ‘peaks and troughs’ and the market up here is working nicely.

As a final thought, it occurred to me that since the percentage split of remainers/leavers in the North is pretty different to the South, perhaps the northern leavers are less uncertain about a future outside of the EU?

Those of us long enough in the tooth to have seen a few cycles know the property market relies on confidence.

 

Simon Butler, associate director at CMME

In a slowing market mortgage lenders feel the pressure as much as clients.

As a result, interest rates are often reduced, and criteria relaxed; reflecting the need to write business and hit lending targets.

The Bank of England has also historically chosen to hold interest rates at a low level during a slump and we expect that to happen on this occasion too.

These market forces often mean a slowing of the market is a positive thing for buyers, especially first-time buyers.

Existing borrowers will need to consider whether this is the best time to move, so they may prefer extending or renovating their existing homes; a second charge mortgage could be a good choice in these circumstances.

And for contractors, who often have complex income and specialist financial needs, the opportunity is the same – relaxed criteria and low rates puts them in a strong position to buy their first property, or move home, to match their changing lifestyle.

Conversely, the situation is different for buy-to-let investors.

Falling prices will make them acutely aware that they have the opportunity to increase their portfolios.

However, they will have to expect that buy-to-let lenders will in turn look to capitalise upon their appetite, in terms of rate and criteria.

When it comes to advice, the changes we’re seeing in the market, have to rapidly translate into the advice we’re giving to our customers.

Often our insight of the market helps to reassure them in their decision making.

Lower borrowing costs also offer opportunities to talk to current clients about investing in their current property and the consolidation of debts; as low interest rates make mortgage borrowing better value for car loans and unsecured finance, than other products on the market.

 

 Paul Broadhead, head of mortgages, Building Societies Association

The mortgage market is a tale of three parts: first-time buyers, movers and remortgagors. A healthy market is reliant on all three groups having sufficient choice in terms of homes, mortgage products and advice.

Recent results from the BSA’s property tracker survey revealed confidence in the housing market has dropped by 3% in the past quarter; negative sentiment has been the public narrative for the past six quarters.

Fewer property sales can equate to less call for mortgage advice; a challenge for the industry.

That said, the remortgage market is growing, so there are still opportunities.

Older borrowers are borrowing more for a range of reasons: social care, pension supplement, helping their children and adventures in retirement.

This group requires mortgage advice equally as much as first-time buyers. It could be decades since their last experience of the mortgage market.

Some older borrowers are ‘right-sizing’ to release capital, although suitable housing is still scarce. If this increases, it will allow next-time-buyers to purchase homes that fulfil their changing requirements -good schools, extra bedrooms, near relatives. This frees up homes for first-time buyers, and the cycle continues.

At the other end of the scale, first-time buyers are buying later and borrowing for longer to make repayments more affordable, meaning the term ‘older borrower’ is no longer limited to the retired.

A 30-year-old taking out a 40-year mortgage will be well into retirement when the mortgage matures making them, technically, a new-age ‘older borrower’.

This shift in home buyer demographics and behaviours make mortgage advisers key to nurturing at each stage to maintain market fluidity.

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