In episode 78 of the Growth Series podcast, Jeremy Duncombe, Managing Director at Accord Mortgages, speaks with Charles Roe, Director of Mortgages at UK Finance, and Rob Thomas, Principal Researcher at IMLA, to reflect on 2022.
Jeremy begins by asking Charles about his forecasts for gross lending in 2022. Charles says the market was much stronger than anticipated prior to September’s Mini Budget, partly because many homeowners sought to lock in to cheaper mortgage rates before Russia’s invasion of Ukraine led to interest rates starting to rise.
Rob adds that households were starting to feel fairly confident until the “profligate” Mini Budget led to the market taking a negative turn. He believes the loss of confidence in the UK among the financial markets persists, despite many of the measures being reversed, and that this has had a cost both the government and everybody else.
Nevertheless, Charles is confident that the mortgage market is becoming slightly more confident in terms of the future direction of interest rates and inflation.
Next, Jeremy asks how high inflation has affected activity in the mortgage market. Charles says the current economic situation is different to previous downturns, as employment has remained relatively high in 2022, while many people have been able to draw on cash savings built up during the pandemic. Furthermore, lenders have taken steps to support those coming to the end of their fixed rate deals.
The conversation then turns to what drove strong employment in 2022. Rob notes that the fear of mass unemployment at the start of the pandemic never came to pass, while many employers have struggled to find the labour they need. This, he believes, has helped people in work feel confident they will continue to have a job in the coming months.
Jeremy then asks Charles and Rob about house prices in 2022, and Rob notes that last year, London underperformed while rural areas such as East Anglia saw relatively strong growth.
Next, they discuss the removal of mandatory three per cent stress tests, which Rob believes had little impact on the market, partly because of the climate of rising interest rates. However, he says the impact could be greater in 2023 as rates hopefully start to fall.
Finally, Jeremy asks if there are reasons to be optimistic for 2023. Charles says the factors such as high inflation and high living costs remain, which could affect arrears and repossessions this year. However, Rob adds that the reversal of the measures announced in the Mini Budget means the market is getting back on the right path.
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