As we bid farewell to the challenges and triumphs of 2023, I am looking forward to a new year, brimming with possibilities. The resilience, responsiveness, and unwavering commitment shown within the broker community during a sometimes turbulent 2023 has laid the foundation for what looks to be a more stable and positive 2024.
First-time home buyers in 2023 faced challenges incomparable to previous generations – affordability pressures from higher interest rates, the increased cost-of-living, and house prices at elevated levels relative to income. In the face of these challenges, borrowing for house purchase has been constrained.
For those looking to enter or move in the housing market, the higher cost-of-living and interest rate rises seen since the start of 2022 significantly raised the bar for consumers to pass affordability tests for mortgages. UK Finance data shows a 28% fall in gross lending to £226bn and a 23% fall in lending for house purchase to £130bn.
But within the mortgage community, we worked together to help more first-time buyers get a foothold on the property ladder, and we helped existing borrowers to stay there.
As the market leader in Shared Ownership we feel that this is a great option for those for whom full ownership is just out of reach and in 2023 we did more to support of Shared Ownership borrowers by launching the Staircase Saver account to help our members staircase their ownership percentage.
We also launched our Home Deposit Saver, awarding a bonus for eligible savers when they take a mortgage with the Society with the aim of helping with moving costs. To help first-time buyers get a mortgage we looked at opportunities surrounding credit scoring. We partnered with Experian Boost to factor in monthly subscriptions like Spotify and Netflix into mortgage applications. And most recently we launched a range of Reach Mortgages, aimed at customers with a lower credit score who might not otherwise be approved for a mortgage.
Although the main pressures on affordability look to be peaking, the outlook for 2024 is one of continuing challenges. We’ve enjoyed a lot more stability in the economy over recent months compared to this time last year but there are a lot of mixed messages. The Bank of England is still cautious over base rate reductions, even hinting at further increases; money markets are pricing in 1.25% of interest cuts next year with the first coming in May (source: Sky News, 15 Dec) and the latest OBR long-term forecasts paint a bleak picture for affordability
As house prices navigate beyond their peak pain period, we can anticipate a revitalized housing market. The past uncertainties are gradually making way for a more optimistic environment, paving the way for increased activity in the real estate sector. This shift in momentum bodes well for both first-time buyers and existing homeowners considering a change. A crucial aspect that brokers should keep in mind in 2024 is the dynamic between remortgaging and product transfers. As the market evolves, so do the needs of our customers. The key lies in understanding and addressing these evolving needs. At Leeds Building Society, we are committed to assisting our customers in navigating this landscape, offering tailored solutions that align with their financial goals.
And I know we will do all we can to help those struggling with repayment, because the right thing to do is to remove uncertainty and protect something people have worked their life to buy. Lenders acted quickly and collectively this year to minimise the number of customers who struggle with their mortgage payments. Yet FCA data shows more than 500k fixed-rate mortgages ending between 1 Nov – 31 Jan 24, which will be sobering to many. The average rate for a two-year fixed rate in Dec 2021 was 2.34%; in early Dec 2023 it was 5.99% (Moneyfacts), meaning a £200k/20-year mortgage will increase by £388 a month or over £4,500 a year.
Despite the economic uncertainties, our collective efforts within the mortgage community will be the driving force behind a successful start to the year. As mortgage brokers, we must rally together to more people to step onto and up the property ladder. By staying attuned to market dynamics and providing innovative solutions, we can work together towards a prosperous year ahead.
Martese Carton is director of mortgage distribution at Leeds Building Society
