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Tom Garratt: The changing face of the mortgage market

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Tom Garratt: The changing face of the mortgage market

So far, 2014 has seen some of the most significant changes in the UK’s mortgage industry. First the Funding for Lending Scheme scrapped its support to homebuyers, then, the Financial Conduct Authority (FCA) introduced the Mortgage Market Review and its strict set of affordability criteria.

Now, eight months in, it seems the resurrection of a familiar topic is on everyone’s lips. The Bank of England’s looming interest rate rise has had everyone from brokers to financial planners debating when the inevitable will finally happen. And, whether it’s to curb consumer spending or to weed out those unable to make repayments, the increase is bound to be felt by customers and professionals across the board.

Recently, a report from financial research firm Verum confirmed that household debt in the UK has quadrupled since 1990, despite interest rates being at a historic low. Soaring by 314 per cent, the total stood at £1,437billion in 2013 and looks likely to increase again, especially with rates due to rise. Though for many this will mean tightening the purse strings for an extra couple of years, access to additional and alternative sources of finance may be needed by those who are already struggling to keep their heads above water.

And, while the economy yo-yo’s between falling unemployment figures and the constraints imposed by low wage growth, brokers are likely to see a sharp increase in consumer enquiries as the search for the most favourable rates becomes priority.

Just as important as any rate rise, however, are broker’s concerns over increasing regulation and the FCA’s ability to prevent common sense judgement calls on lending. The recent guidelines have already discouraged some deals as broker’s become more and more cautious with what would have previously been considered low risk deals.

In this case, what should lenders be doing to ensure customer satisfaction as well as compliance?  Offering a variety of options seems to be the sure way to keep everyone happy – which means more brokers providing valuable alternatives best fitted to the clients’ personal circumstances. Following a 63% increase in secured loan business in the past 12 months, The Loan Engine’s latest Broker Stance Survey highlighted both the optimism being felt by brokers and the growing confidence amongst prospective borrowers. And, with the rate rise looming, we should see large numbers of brokers begin to flourish as clients turn to them for some much needed support.

Speaking at the unveiling of the latest Bank of England’s quarterly inflation report, Governor Mark Carney, said: “The Committee’s guidance remains unchanged: increases in Bank Rate, when they come, are likely to be gradual and limited. While that is an expectation not a promise, its clarity is helping businesses to plan, invest and hire, supporting the economic momentum we see today and will need tomorrow.”

And there you have it folks. While no date has been set in stone, as Mr Carney suggests, the time has come for lenders to prepare for the next phase in the developing mortgage market. Whether it hits this year or stretches out until 2015, the rate rise is bound to spark a number of changes in the personal finance industry as those feeling the pinch look for more financial assistance.  

Perhaps the significance of the hike will only be truly understood in time. But for now one thing is for sure, as we progress into this new era, it will be the ability to embrace choice with a ‘whole of market’ mentality which will be the key to success.

Attributed to Tom Garratt from the Loans Engine





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