BrokerJan 17 2022

Mortgage advisers should plan for 2008-style market

Search supported by
Mortgage advisers should plan for 2008-style market
Photo by Andy Rain/EPA-EFE/Shutterstock

Mortgage advisers should plan for a “different type of market” in 2022, as a sense the housing industry is “fast creating a perfect storm” reminiscent of the problems seen in 2008.

Martin Stewart, a director of franchise mortgage advice network The Money Group, warned brokers to firm up their financials, de-risk their businesses and look to scale up, to protect themselves from what could be a very difficult year ahead.

“Those of us who watched the market collapse in 2008 knew that it was not the run on Northern Rock that started it all, that was simply the end of the beginning,” said Stewart.

“The pressures were building well before the balloon went 'pop' and speaking today with those with more grey hairs than they care to mention, many are suggesting that we may be about to have history repeat on us again. 

“I have spoken to a few people of late – title insurers, bridging lenders and various people higher up the lending food chain than me. They all had one thing in common – a sense of concern and uncertainty about the market in 2022. [...] There is a sense that we are fast creating a perfect storm.”

He said he hoped this was not the case, but pushing rates down in order to keep everything propped up “does suggest we may have broken economics somewhere along the way since 2008”. 

He continued: “We may not run out of cans to kick but we may suddenly find ourselves short of road."

Based on such analysis, Stewart suggested brokers plan for a different type of market in 2022. 

“I would get my business on a firm financial footing,” he warned. “I would be looking to de-risk by exploring different income streams and I’d certainly be thinking about scaling up. No zebra wants to be the one limping along on its own, separated from the pack.”

With the UK’s mortgage broker collective known for having the kind of memories which “would give goldfish a run for their money”, Stewart stressed the need to “remain vigilant”.

House price growth year-on-year sat at 10 per cent in November, despite one of the worst Octobers for house sales in nine years.

Some experts anticipate the housing market to experience an “easing off” from double digit growth in the months ahead, whilst others are not convinced “a perfect storm” is brewing at all.

James Forrester, managing director of Barrows and Forrester, told FTAdviser earlier this month there might be some changes, such as a slight correction in the house buyer trend towards larger properties and a slightly lower gear in terms of house price growth.

But he added: "The dark clouds of uncertainty that hung over the UK property market for much of 2019 and early 2020 have yet to return and there are no signs of them doing so in 2022 either.”

Industry ‘ripe for rotation’

Despite warnings of a housing market remnant of the financial crash in the short term, Stewart said he was hopeful 2022 could be the start of a more innovative mortgage lending industry in the long term.

“The industry is ripe for rotation,” he said. “There is a need for new blood at all levels and 2022 could be the year when more people decide the phrase ‘we’ve always done it that way’ just does not wash anymore.”

Stewart said the industry needed “a new breed of business” to help it adapt to the new breed of consumer fast approaching in the rear view mirror.

So far, the mortgage network director said he puts the success of his industry’s sector over the last year in large part down to “luck”.

“We have been very lucky as a sector and the pandemic has been kind to us at a time when many other industries have battled restrictions, lockdowns and cancellations.

“I have yet to meet anyone in financial services that has not had a blistering 2021 which itself came hot on the heels of a very satisfactory 2020.”

Moreover, the so-called cliff edge following the end of the stamp duty land tax holiday and the government’s furlough scheme never came, Stewart pointed out. 

“When we studied our numbers throughout the year they continued to rise at a rate that seemed unfathomable and unrealistic when set against the news we were absorbing as we went along,” he said.

“But here we are, alive and well and making hay while the sun shines.”