Mortgages
1. New Mortgage Volumes Are Down as Cost of Borrowing Appears to Have Peaked:
- Although the cost of living crisis is easing, mortgage volumes are still trending downward. The only growth seen is in remortgages.
- Indications are that borrowing costs have hit their peak, but rising mortgage rates will continue to have an impact. Nearly half of fixed-rate mortgage agreements made before rates began to rise still need to be renewed, and the effects will be felt well into 2026.
- The impact of these changes will vary by region. Year-on-year changes in mortgage payments have differed across the UK, with Wales, the South West, and the South East seeing the largest increases. While fewer homeowners are facing repossession, buy-to-let repossessions have increased.
2. The Impact of Higher Rates:
- There are fewer first-time buyers now, and those who can purchase their first home are relying more on savings and financial contributions from family. More first-time buyers are also opting for joint mortgages.
- Due to rising rates, short-term fixed-rate mortgages have lost some appeal compared to longer-term deals. However, as rates are expected to fall soon, longer-term deals may also lose attractiveness.
- With the rise in mortgage rates, average monthly payments have increased over the last two years. Despite this, fewer customers are using overpayment features, except in cases where usage has increased.
3. Variable Brand Performance in a Volatile Market:
- Market volatility since May 2023 has caused lenders to increase rates and restrict product offerings, impacting new business market shares. Barclays, Halifax, and NatWest have all gained market share, primarily through movers and switchers. Halifax has also attracted more first-time buyers.
- As deals have started to be withdrawn, remortgaging activity has increased, with Halifax, Nationwide, Santander, and NatWest having a high share of renewals.
- Interest rates remain the primary reason for choosing a mortgage, but for first-time buyers, other factors such as service and loyalty to their existing bank are becoming more important. For movers, loan availability and fees are growing in significance, while for remortgagers, speed of service and convenience are critical.
4. Spotlight on Intermediaries:
- The use of intermediaries has remained stable overall but has increased among movers. First-time buyers and those switching mortgages are more likely to use intermediaries, with a higher proportion of younger buyers relying on them. However, the number of older borrowers using intermediaries has also risen.
- Intermediaries are often the key source of information and their recommendations play a major role in mortgage choice, more so than brand loyalty. Intermediary users are less likely to stick with their existing mortgage provider and are less likely to use the lender's website for applications. They are also more satisfied with the mortgage experience.
- Increasingly, intermediary users are turning to digital channels to manage mortgage applications, providing opportunities for online brokers to expand in the mortgage market.