Economic pressures are likely to result in increased demand for specialist mortgage products and advice, according to Kate Davies, executive director at the Intermediary Mortgage Lenders Association.
Davies explained the market can expect a rise in the number of homebuyers with adverse credit and multiple income streams, which require targeted help.
She added this demand could extend to the buy-to-let sector, explaining that, as larger landlords grapple with more complex finances, the need for specialist solutions may grow.
“As the size of the overall mortgage market shrinks, it will make sound business sense for advisers to diversify into new sub-sectors, and specialist areas are a logical progression.”
Buy-to-let
Davies also spoke on the buy-to-let market over 2023, pointing to research by IMLA which showed, on average, landlords with mortgages expect their monthly interest payments to rise by 80 per cent over the next two years.
“After many years of tightening regulation increasing costs for landlords, it seems inevitable that 2024 will witness a rise in the number of buy-to-let investors quitting the market as their business models become unviable,” she said.
However, Davies warned the research also showed more landlords plan to buy rather than sell property.
“We may well see a continuing change in the shape of this market, with more smaller landlords leaving, and larger portfolio investors buying up more property.”
First-time buyers
Davies also spoke on the plight of first time buyers, stating: “As and when interest rates hit a level where borrowing over a longer term makes affordability calculations work, we may see a rise in first time buyers once more pursing this strategy.”
She explained that longer term lending is permitted within the Financial Conduct Authority’s rules and that most lenders offer the option.
However, she cautioned that, while this route “eases pressures for those households in the short-term” it could “result in higher debt burdens in the future”.
Davies said it limits the help available, notably term extensions, should borrowers face financial difficulty in the future.
April saw the end of the government’s help to buy scheme, which had helped borrowers purchase 387,195 homes over a decade, using £24.7bn of equity loans.
As a result of this, and the ongoing challenging economy, Davies reported that there has been an “explosion” in shared ownership.
She evidenced this by pointing to one specialist adviser who estimated that demand for shared ownership property now outstrips supply “by a factor of six to one”.
While a lot is still unclear about 2024, “one thing we do know is that the role of the mortgage adviser will remain absolutely necessary for borrowers next year”.
She explained that, as borrowers continue to face economic challenges, and their needs become more complex, mortgage advisers will become more important.
“Intermediaries accounted for 84 per cent of all mortgage business written in 2022. We at IMLA predict that figure could reach 90 per cent in 2024.”
