The later part of 2022 has been thoroughly dissected and whilst we appear to be on a far more even keel from an economic standpoint, the aftermath of such seismic market turbulence continues to generate some significant challenges for lenders and borrowers.
This is particularly apparent as a range of additional financial burdens are being placed on potential borrowers, homeowners, tenants, landlords and businesses across the UK. Meaning that the outlook for 2023 remains difficult to predict, although what we do know is that demand in the more specialist areas of the mortgage market are set to rise even further.
In the coming months, levels of unsecured debt are likely to escalate further and rising interest rates are making it expensive to service these debts. This is a combination which will result in even more support and expertise being required to help consumers consolidate debt and reduce monthly outgoings.
Adverse credit and unsecured debt
Such a trend was highlighted in the latest Pepper Money Specialist Lending Study which found that a third of people with adverse credit said that the level of their unsecured debt has risen in the last 12 months, while 40% have increased the debt they have on buy now pay later schemes. In addition, nearly 1 in 5 people (19%) with adverse credit were suggested to have outstanding debts, aside from the mortgage and student loans, of more than £10,000.
The data also discovered that almost a third (31%) of people with adverse credit are concerned that their level of outstanding debt will make it harder for them to get a mortgage. As outlined in the commentary around this report, brokers are being urged to undertake a comprehensive review of their customers’ circumstances to help them navigate this difficult period.
However, it’s prudent to point out that many brokers will also require additional support in delivering these types of solutions as they largely sit in the domain of specialist lenders who have their own complex set of criteria, policy and case packaging requirements. And this is where a trusted packaging partner can support brokers with all the heavy lifting to help such clients consolidate their debts within the right structure to achieve the right outcome over the short, medium and longer-term.
Complex buy-to-let
Many landlords have suffered in recent times and the buy-to-let market has been hit hard due many different influencing factors. With record levels of inflation, the cost-of-living crisis and housing market volatility, nearly half (48%) of landlords have been unable to expand their property portfolio and looking ahead, two out of five (42%) will even consider downsizing, as a result, if market conditions continue as they are.
This is according to data from Aldermore but, on a far more positive note, whilst 49% of landlord respondents admitted that market conditions have become more challenging in the last twelve months, 54% still felt optimistic about the future and 66% stated that being a landlord remains a good way to make money.
From our perspective, business volumes at the more complex end of the BTL market remain strong and plenty of opportunities are likely to emerge in 2023 for landlords who are best placed to take advantage. When I say best placed, I mean those who are working closer than ever with brokers to assess their portfolios and identify opportunities as they arise.
Commercial finance
Focusing on commercial finance, the latest Business Finance Review from UK Finance on the lending needs for SMEs in Q3 2022 showed that SMEs have become more cautious in their outlook, and this is reflected in a more subdued appetite for finance.
The data highlighted the expected slowdown in lending to SMEs following a reduction in applications for finance – particularly loans – in the previous quarter. SMEs’ demand for finance continued to be muted as they became more cautious in the wake of market uncertainly during this period. However, the review also outlined that demand has been somewhat stronger for products which help with cashflow management, such as overdrafts and, more notably, invoice finance and asset-based lending products.
Many SMEs have obviously been impacted by inflationary pressure and accessibility to products/services across the board in more recent times and this is being reflected in activity levels across the commercial sector but, as highlighted, opportunity is apparent in some of the more niche areas. Opportunities where packaging and specialist distribution partners can add real value to any intermediary advice process.
Donna Wells, Director at Envelop
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