Marie Grundy, Managing Director of Residential Mortgages and Second Charge
Market volatility and unprecedented events have become a feature of life in our industry over recent years. Lenders and intermediaries alike are currently navigating through yet another challenging period.
Market participants are having to react to the prospect of peak interest rates reaching 6.5%, which is a significant less than six months ago, where terminal rates were expected to be in the region of 4.5%.
Consequently, we are back in the thick of frequent repricing and product withdrawals which is undoubtedly causing challenges for anyone involved in our industry, and more importantly, borrowers looking to secure deals before they disappear.
However, if there's one thing we can take from these trading conditions, it's that we have been before and we are a resilient bunch.
Yes, there are some headwinds, with the likelihood of house prices falling and a predicted 1.8 million borrowers coming to the end of their fixed rate during 2023 and facing significant hikes to their mortgage payments.
As a result, many lenders will be thinking responsibly about adjusting their credit risk appetite to reflect the changing economic climate.
However, there are still opportunities to help borrowers who may be looking to find a new mortgage deal, making that all important property purchase, or borrowing more money for a whole host of reasons.
We all know that the value of advice cannot be underestimated, and forward-thinking intermediaries will be looking at more solutions to help clients than ever before.
The Chancellor's recent Mortgage Charter set out some measures to support borrowers who may face payment difficulties. For most borrowers, though, there will be options to consider without interventionist measures, which will help them manage increases to their mortgage payments.
Demand for seconds
As a prominent specialist lender, we are seeing exceptionally stong demand for second charge products in particular - it is a market we believe will continue to provide strong and stable funding arrangements for homeowners looking to raise capital.
While there are millions of borrowers coming to the end of their fixed rate loan over the coming years, there are millions of others who are locked into cheap long-term deals.
For there borrowers, it will be critical to make sure their existing mortgage arrangements are not distributed should they wish to raise additional funds. This is where a second charge loan can come into its own, as it allows for further borrowing while leaving the borrower's low underlying rate undisturbed.
Raising additional capital
It is also widely accepted that demand for product transfers will continue to thrive. As any broker will know, these are proud-for-proud transactions and so raising additional capital is not possible.
However, there will always be borrowers who need increase their borrowing, whether it's to consolidate their debts, make home improvements or to invest in their own business.
Equally there will be a wide range of products for homeowners looking to refinance outside of a product transfer, and if there is a readjustment in house prices there will always be purchasers who will benefit from these changing conditions.
Second charges are sometimes overlooked by brokers, dismissed as catering solely for those who have been rejected by the high street.
However, that's not the case. In the current environment, borrowers are becoming increasingly attracted to second charge products because of their flexibility and the fact they can retain their first charge loan.
Thereforem seconds will become an increasingly useful tool in the broker's toolkit over the coming year or two.