Market Commentary with our Director of Mortgages

The market appears to have calmed following the Truss/Kwarteng Mini Budget with Lenders coming back to the market with pricing which appears in the residential and re-mortgage world to be around 4/5% currently, due to the SWAP market also being calmer. Indeed at the time of writing, 2-year SWAP rates are at 2.922 and 5 Year rates at 2.739% - the lowest they have been for many months. However, the lack of innovation from Lenders in products as they fixate continually on 2 and 5-year pricing is frustrating. Interestingly, at the height of the uncertainty following the Mini Budget, tracker mortgages went from a 5% market share to 25% almost overnight as customers and brokers sought out flexible products whilst in the eye of the rate storm.

What is causing concern is the BTL market which shows little sign of revival and is worryingly affecting both lenders, brokers and distributors in terms of opportunity and income. The purchase market in BTL has effectively ground to a halt as the combination of affordability and stress rates make it impossible to make cases fit at the levels required and to be expected given the criteria and credit modelling of Lenders. This is impacting both mainstream and capital market lenders, the latter significantly as they are finding it difficult to secure new levels of funding to take them into 2023 and either remain out of the market or with product suites that simply do not fit. What would be great to see in 2023 is some real imagination from lenders as to how they innovate in criteria and product to stimulate this market. Currently, dropping rates in BTL is a bit like putting petrol in a 3-wheel car, it still won’t go, we know the market is there, we just need some help from the lenders.

It is the time of the year for predictions on the size of the market in 2023, and Lenders have reported the purchase and residential area to be as low as £200bn next year up to £285bn (down for the anticipated size of 2022; £310bn). With the BTL market potentially at £10bn, down from £50bn this year.

However, opportunities abound in the PT market as referred to above and where brokers will have to play. Currently, most lenders write between 60% and 70% of this business themselves, as advisers have been distracted by new customers or because they maybe “cherry pick” those customers with larger advances to place? If the new business market slows, then advisers should be well positioned to take advantage and secure more of this area for the benefit of their business and their customers.