It’s fair to say that the mortgage market has had to endure a rollercoaster period with no sector immune from the recent political and economic instability. However, homeowners still need to remortgage, landlords still need to restructure their portfolio’s, solutions still need to be found to support a range of property purchases, people still need to free up money which is tied up in their homes and businesses still need to maintain strong levels of cash flow to help counter rising inflation.
This highlights the growing importance of the advice process and the additional support required by intermediaries from packagers to deliver such a diverse and complex range of solutions.
So let’s take a look at some areas which need this additional support.
Bridging
In recent weeks, we’ve heard from a trio of short-term lenders who are experiencing growing demand in different areas of the sector.
Bridging Finance Solutions reported a sharp rise in the number of clients securing bridging loans in order to support their children through the purchase of property. It suggested that young aspirational home owners, keen to take their first steps onto the property ladder, are facing unaffordable house prices coupled with rising interest rates and reluctant lending which means they are having to turn to their parents for additional help.
Aspen Bridging has experienced an influx of overseas investment enquiries since the government’s mini-budget on 23rd September. With the weakened pound and the large reduction in short-term lending and term-based mortgages, Aspen suggested that overseas investors have recently made up nearly 30% of all new enquiries. Foreign Nationals have made up 20% of its client base over the last 12 months.
In addition, luxury asset short-term lender, Suros Capital conveyed rising levels of new business with its loan book up over 200% year-on-year, with significant growth experienced over the last three months.
These represent good examples of the breadth of options available across the short-term finance sector and its flexibility in meeting a variety of borrowing needs. Not to mention the available opportunities for brokers who are in a position to access these types of solutions.
Equity release
New equity release borrowing is said to have hit a record high in Q3. The latest figures from the Equity Release Council showed that homeowners aged 55+ took out a record 13,452 new equity release plans in Q3, a quarterly rise of 8% and an annual rise of 34%.
The number of equity release customers has risen by 36% while total lending is up 40% compared to 2021. With 9,648 returning customers and 2,419 further advances agreed, the market saw 25,519 customers active during Q3 with total lending topping £1.71bn, another record figure.
Product preferences amongst new customers were split almost equally during Q3, with 52% of customers opting for lump sum lifetime mortgages while 48% chose drawdown lifetime mortgages with some of their loan set aside for future use.
As outlined within this data, while market turbulence has added to upward pressure on interest rates, product flexibilities and stringent safeguards mean modern equity release remains one of the most secure and adaptable way for some people to access the money tied up in their home without giving up ownership or risking repossession through fixed repayment commitments. And this is an area where the quality of advice also remains key.
Commercial Finance
As alluded to earlier, cash flow is a top priority for many businesses and the successful management of this has become the primary reason for small business applications for finance.
This is according iwoca’s latest broker research which showed that cash flow management is the most common loan purpose for over two in five small businesses (42%) in Q3, a 16 percentage point increase from the same period last year. This is the first time since Q2 2021 that cash flow concerns have overtaken ambitions to grow their business as the primary reason to access finance.
One in five brokers (19%) say it would take over 12 months for the lending market to return to the number of loan requests they received pre-pandemic, a significant increase since Q2 2022, when only 7% of brokers thought it would take over a year for markets to bounce back.
It’s evident that economic and market conditions are far from simple or certain, yet borrowing demand remains strong and business is still being written across a host of specialist markets. These are areas which will continue to evolve and, to keep pace, intermediary firms need to adjust their offerings accordingly. And establishing a closer working relationship with a trusted packaging partner can certainly help with this evolution.
Donna Wells, Director at Envelop
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