Mortgage accessibility has hit a three-year high, as brokers report encountering fewer difficulties when sourcing mortgages for clients than at any point since the introduction of the Mortgage Market Review (MMR) in April 2014, according to a new report from the Intermediary Mortgage Lenders Association (IMLA).
Almost a third (30%) of mortgage brokers reported that they encountered no problem sourcing a mortgage for any type of client in the second half of 2016 – up from 26% in the first half of the year and double the rate recorded a year earlier (15%).
This increase in mortgage accessibility is a clear reflection of improving lending conditions and a sign of the continually strengthening relationship between mortgage lenders and brokers.
Brokers also reported an uptick in successfully sourcing mortgages for a variety of different groups of borrowers. The rate of brokers who said they were unable to source a mortgage for first time buyers dropped from 29% in the first half of 2016 to 16% in the second half of the year, while the proportion who were unable to source a mortgage for standard-status borrowers also fell, from 26% to 15% over the same period.
Mortgage Accessibility has hit a Three-Year High
Softening conditions were also reported for borrowers who sit outside of the mainstream mortgage market. The rate of brokers who were unable to secure a mortgage for borrowers who are self-employed or have irregular incomes decreased from 50% in the first half of the year to 25% in the second half, while the rate for those unable to source mortgages for interest-only borrowers dropped from 52% to 31%.
Furthermore, there was also a substantial decline in the rate of brokers who were unable to source a mortgage for borrowers looking for loans lasting into retirement, which fell from 43% to 29%.
The increase in brokers successfully sourcing mortgages for a greater proportion of clients is set against a backdrop of decreasing average mortgage rates. The Bank of England (BoE) reported that the average two-year fixed rate mortgage at 75% loan-to-value (LTV) fell by 45 basis points, from 1.90% to 1.45% between December 2015 and December 2016 – enhancing consumers’ affordability.
The Executive Director of the IMLA, Peter Williams, comments: “It is hugely encouraging to see a greater number of brokers are reporting that they are successfully arranging mortgages for a wide variety of clients. Over the past few years, regulations like the MMR have raised the bar in terms of borrowers’ requirements, which some predicted would leave many borrowers locked out of the market. This new regulatory regime has made the intermediary channel more important than ever, and brokers are clearly doing a great job of helping people get a foot on the housing ladder.
“House prices have been growing faster than incomes over the past few years, which has challenged affordability. This issue has been particularly acute among first time buyers, which means the fact that just 16% of brokers reported they were unable to source a mortgage for someone in this group over the six months is very positive news. Low mortgage rates have continued to support borrowers’ affordability by reducing monthly payments.”
According to the report, both lenders and brokers alike considered the remortgage market as having the best prospects for growth in 2017, followed by lending to first time buyers.
The remortgage market has grown considerably over the past year, with homeowners looking to tap into growing equity and take advantage of the low rates available to them. According to the latest data from the Council of Mortgage Lenders (CML), homeowner remortgage activity rose by 22% in value (from £5.8 billion to £7.1 billion) and 21% in volume (from 33,200 customers to 40,300) in the 12 months to January 2016.
In terms of mortgage accessibility for the remainder of 2017, lenders viewed borrowing into retirement as the segment of the market with the greatest prospects for growth, with a total of 83% of lenders anticipating that there would be greater availability of mortgage finance to such individuals.
The area of the market chosen to have the greatest increase in availability over 2017 was lending to landlords using a limited company vehicle – in the face of the forthcoming changes to mortgage interest tax relief – with 65% expecting growth potential.
Williams concludes: “The low rate environment is ideal for existing homeowners looking to switch onto a better mortgage deal, and it is no surprise that both lenders and brokers foresee significant increases in this part of the market. While mortgage rates look as though they might have bottomed out, any increases are likely to be minor and will still be conducive to remortgaging activity.
“It is also positive to see that lenders predict greater availability for customers looking to borrow into retirement. This part of the market has been underserved in recent years, and it is vital that this growing demographic has access to the mortgage market.”
Have you seen a change in mortgage accessibility over the past year?