Redundancies, businesses folding, market uncertainty due to emerging variants of the Covid-19 virus and the resulting potential restrictions – it all paints a rather bleak picture of what the mortgage market could look like as we head into 2022.
I say ‘could’ quite deliberately, because all the evidence on the ground suggests otherwise. Demand for buying property has remained high over the course of this year, with no signs of that tailing off.
Our Caithness-based team has already secured 75 mortgages in the past year, while at our base in Aberdeenshire we arranged in excess of 350. We have more than doubled the head count of our team to cope with demand.
Nevertheless, it would be prudent to consider certain irrefutable factors in relation to the performance of the market next year. The current inflation rate of 5.1 per cent is higher than the Bank of England’s 2 per cent target, leading to an inevitable rise in interest rates as the government strives to curb inflation.
While an interest rate rise may deter some potential buyers from purchasing property, it should be considered in the context of current interest rates being exceptionally low. The Bank of England base rate is currently 0.1 per cent, so it is unlikely that a modest increase would detrimentally impact the mortgage market.
Covid-19’s pervasive tentacles continue to reach into every aspect of our lives, and the mortgage market is no exception. Over the past year, we have seen a number of measures put in place by government to stimulate the market during what could have been a potentially catastrophic period over lockdown.
The furlough scheme kept countless businesses and households afloat, and the stamp duty – or land and buildings transaction tax as it is known in Scotland – holiday ended earlier in the year. The winding up of these schemes, combined with the potential for further disruption to business and employment could create a perfect storm for the mortgage sector, with demand plummeting in tandem with income.
Any further lockdown could also slow each stage of the property-buying process, from viewings right through to service times from lenders.
The flip-side of the Covid-19 coin is that lockdown has in many cases been a catalyst for home buying. Spending so much time at home has forced many people to reconsider their priorities, where these relate to the location, size or nature of the property they would like to live in. Anecdotally, we have certainly experienced a surge in people relocating, scaling up or downsizing over the past two years.
Continuing with the positive theme, I predict a growing number of new lenders entering the marketplace, all offering a spectrum of innovative products to differentiate themselves and appeal to different sections of the market. Currently, ‘green’ mortgages – where lenders offer incentives for more energy-efficient properties – are a bit of a niche area, but I can see these burgeoning over the next year. Cop26 has firmly placed climate change front and centre of every industry, including the housing market, and by extension the mortgage market. This is only going to develop further as time goes on.
Another trend we have noticed gathering pace in recent times is for first-time buyers to move straight into houses, as opposed to the more traditional route of starting out with a flat. Obviously this is very dependent on location, and therefore property value.
New housing developments are springing up at pace around the UK – nearly 50,000 new homes were built in England during the first three months of 2021 – reflecting the buoyancy and resilience of the housing and construction sectors.
We expect house prices to continue to rise, and housebuilders are working hard to meet the demand for new properties – and there is no doubt that demand is there.
Overall, I would argue that the mortgage market is well-placed to tackle whatever 2022 throws at it. The future is bright for everyone in the property market, not least the buyers themselves. A bleak picture? No – more like a blank canvas, replete with possibility.
Phil Anderson is managing director of Phil Anderson Financial Services
