Duncombe noted that mortgage lenders remain committed to supporting the market but that all firms will need to innovate to help landlords withstand the pressures they currently face.
He pointed to the introduction of ‘top-slicing’ (which allows landlords to have their personal income taken into account on applications), the removal of minimum income levels, and Accord’s recent ICR stress rate reductions as examples of innovation.
However, he added that “there is still further to go, so watch this space”.
Summing up 2022, Duncombe described it as “volatile” and said he hopes everyone in the sector can make it a “new year resolution to do our bit to ensure a calmer and more stable 2023”.
Duncombe noted that the “mini” Budget was a key event in 2022 for the mortgage market which “tested resilience and saw demand drop sharply”, but in his view, the impact from it has “effectively been reversed” at this point.
“It’s important, to look past the volatility caused by the misjudged mini Budget and realise that the market was already under pressure to increase interest rates as a result of Covid debts, supply chain challenges, goods shortages and increasing costs for everything from fuel to essential food items.
"So, while this unfortunate event was less than helpful, the underlying challenges were already there,” Duncombe said.
“Things are a lot calmer than they were a month or so ago.
"The mini Budget has effectively been reversed, the markets have reacted positively and we’re basically back to where we were before the 23rd of September – but with a lot more signposting from the government, and a realistic articulation of the challenges we face going forward.
“While we might not like what we hear, the markets dislike surprises but do like stability, calm and a clear sense of direction," he added.
'Confidence drives the market'
Since October, swap rates - a leading indicator for mortgage rates - have come down steadily and mortgage rates have followed suit.
Duncombe believes they will begin settling in line with longer-term historic averages of around 5 per cent.
“Stability helps confidence, and confidence drives the market. Cost-of-living challenges remain, with affordability still an issue for many, so I’d expect a smaller completions market in 2023 – especially with lower application pipelines flowing into 2023,” Duncombe told FTAdviser.
Although things were quiet in December, as is common in the run up to Christmas, Duncombe believes the mortgage and housing sector may start gathering momentum in January when there will be a “level of pent up demand”.
“While the purchase and first-time buyer segments may drop off slightly due to cost-of-living and affordability restraints, we expect product transfer and remortgage business to be buoyant,” Duncombe explained.
In his view, “lender appetite" remains.
“There is money to lend and we will hopefully see more consistent availability of products, too, as providers become more confident with pricing and perceived risk. At Accord, we also want to continue to innovate and launch new propositions,” Duncombe added.
In 2022, the mortgage lender launched a number of new initiatives, including its ‘cascade score’ which opened up more options for borrowers who do not meet the lender's higher loan-to-value score card but are in line with its standard one.
It also launched ‘LTI Boost’ which offers up to five and a half times income multiples to borrowers and is designed to support underserved borrowers.
Looking to the year ahead, Duncombe said: “The markets are inherently resilient and we’ve been through as bad if not worse in recent years and come out the other side, so I remain optimistic for the opportunities.”
jane.matthews@ft.com
