The last year - and the last three months in particular - have been a turbulent time for the mortgage market.
So what does 2023 have in store for the sector and what specific areas does it need to focus on in the coming year?
We asked leading industry figures for their take on what the future may hold.
Clare believes consumer confidence has been hit by recent financial uncertainty and a climate of higher rates, which poses a “new set of challenges” for the industry in 2023. However, she notes that lenders have started to “cautiously” lower the price of some products, which many consumers will hope to see continue into the new year.
“Rates are unlikely to hit the lows seen in the last two years, but we can expect a less turbulent market next year. Specialist lending has come into its own this year, and these niche solutions will remain vital to many buyers in 2023. However, the buy-to-let market remains unsettled, and we need to pull together to retain landlords as the market evolves.
“Above all, customers will require a calm voice and steadying hand during another transitional period. The value of advice has never been more important.”
Nathan predicts a difficult year for many, given the climate of higher interest rates, high house prices and the cost of living crisis. However, he believes this “does undoubtedly also offer opportunity”.
“Whilst the purchase and first-time buyer markets could be subdued compared to recent times, data shows there is the potential for a buoyant remortgage and product transfer market.
For advisers that are proactive in this space and have a robust contact strategy, bearing in mind the increasing complexity in assessing customers’ finances and the subsequent need to provide expert advice, this will keep you busy.
“It also feels a greater level of innovation and flexibility will be needed in 2023. Affordability, first-time buyers and sustainability have all been cited as areas of both challenge and opportunity, and whilst we have started to see some parties take positive steps to address them, it feels there is more that can be done, and will need to be done, in order to make sure the market remains healthy in 2023 and beyond.”
Nathan believes one important focus for the industry in 2023 should be ensuring that future homeowners are well equipped to make informed decisions with their finances, as this is an area that “continues to be overlooked or underinvested in”.
“Working in mortgages day in day out, we understand the issues that the gulf between wages and escalating house prices causes. We also understand the importance of saving for a deposit and being prudent with credit arrangements, but these basics aren’t always taught within education settings or when a young adult is making their first steps towards financial independence.
“With these elements arguably becoming more important year after year, it would be good to see the industry come together to consider how we can improve the prospects for these individuals.”
Nathan adds that ongoing economic challenges will mean more mortgage customers will face financial difficulty over the coming year and that advisers will be in a position to provide important help.
“Based on an adviser’s unique opportunity to utilise a diverse and comprehensive range of lenders, this presents a real opportunity for intermediaries to not only support their customers’ mortgage requirements, but also improve a customer’s entire situation and wellbeing. That being said, it’s imperative that as an industry we aren’t complacent with this position. Constant collaboration and education will be central to how successfully we can deliver this for customers.
“Working for a technology provider, it would also be remiss of me not to mention the opportunity this still offers for advisers. For all of the reasons highlighted, it’s likely the average customer will need more advice and hand holding moving forward, at a time when advisers already spend a huge amount of their time going ‘above and beyond’. This is where technology can give back. Whether it’s revisiting existing practices or adopting new tools, based on the solutions that are now available, 2023 can be the time when advisers can increasingly work smarter and not harder.”
Danny is “hugely optimistic” about the year ahead and expects activity to remain high.
“I also believe that the industry could see positive developments around its identity verification procedures in the second half of the year. Integrating tech is integral to boosting the efficiency of operations, so I hope to see positive changes in this space sooner rather than later.”
Sebastian believes lenders will need to be more proactive in trying to gain new customers in 2023.
“A market that is predicted to be much smaller than 2022 is great for consumers, as lenders will need to be much more competitive rate-wise. Watch mortgage products become a lot more competitive from February/March onwards.”
Sebastian adds that the country is currently experiencing a housing crisis, which will get “even bigger” if the industry doesn’t work out a way to fund buy–to-let mortgage products more competitively.
“As much as the Government keeps victimising BTL landlords, without a strong private rental sector, they are going to be in big trouble.”
Graham believes purchase volumes will fall in 2023, but expects “massive” remortgaging opportunities.
He advises brokers to stay calm, plan and focus on customer engagement, as many people won’t think they can buy or remortgage and will need to be educated or nurtured. At the same time, Graham says advisers must improve their knowledge and awareness, as more clients have specialist needs or adverse circumstances.
He highlights several areas that the industry needs to focus on in the coming months, in particular replacing Help to Buy to support first-time buyers, home movers and remortgage customers get on the housing ladder.
Graham also says the industry should concentrate on what a green mortgage is, rather than greenwash, and help landlords adapt to upcoming Energy Performance Certificate rule changes. Furthermore, he believes firms must address how to retain customers more efficiently and effectively.
Product innovation is highlighted as another priority for 2023, given people’s financial constraints and the fact that many people are “trapped” in rental accommodation or on standard variable rate mortgages.
“Engage with your customers well before their current product matures, get really good at referrals - everyone knows someone with a mortgage - understand lenders’ criteria around adverse credit [and] embrace technology.”
Graham adds that protection sales will be hard in the cost of living crisis “but also vital”.
Martin believes that while it is probably too early to give an accurate forecast of gross lending, as this will be based around how big the purchase market is, it is likely to be lower in 2023 than in 2022.
“But it will still be a positive number when measured against the last 10 years. There is also the largest remortgage and PT opportunity that we have ever had. We should not hide from the challenges but there will always be opportunities.”
Martin notes that there is lots of contradictory information circulating in the market, on social media and in the press. This, he says, makes it “so important” to keep in contact with your clients.
“They need reassurance from someone they trust, and I believe the adviser is in the perfect position to do this. Proactively reaching out to them will mean a more loyal and active client bank in the long run.
“The market is so hard to predict at the moment and all the economic and political challenges mean that it is all about vigilance and trying to keep one step ahead. Information is always key and ensuring you get regular updates from lenders; your chosen distributor and commentators will put you in a much better position to provide guidance to your clients.”
Brian expects 2023 to bring “challenges” for the industry, as house prices are forecast to ease and mortgage pricing is “unlikely” to get back to recent all-time low levels. This, he says, means affordability will remain challenging for the foreseeable future.
“Housing transactions are likely to be significantly lower than the last few years, although the market will be bolstered by circa 1.8 million borrowers rolling off from fixed mortgage rates during next year. Due to the constraints on affordability that a combination of high inflation, elevated energy costs and mortgage pricing have heaped on consumers, product transfers are likely to be the default option for many borrowers and this will impact on broker businesses negatively in revenue generation and cash flow. The implementation of Consumer Duty facing the mortgage industry is anticipated to be the largest regulatory change in more than a decade and will be challenging for networks and directly authorised businesses alike in adapting to.
“Despite all the headwinds, brokers have once again demonstrated their adaptability to combat the myriad of hurdles that have presented themselves this year, and no doubt next. However, there will still be a housing and mortgage market in 2023, albeit it will be shaped and sized differently, but mortgage borrowers more than ever will need the advice and expertise of mortgage brokers to ensure that they can navigate the economic turbulence that lies ahead.”
Craig believes the purchase market will be “slow out of the tracks” in 2023, due to the end of Help to Buy and the Mortgage Guarantee Scheme. However, he also expects to see a “significant year of refinance”, with more remortgages and product transfers, which means customers “need independent advice more than ever”.
He highlights innovation as a key area the industry needs to focus on, as borrowers need support to cope with the affordability and deposit challenge, and help adapting to life after Help to Buy.
“Innovation and collaboration is essential along with continuous broker education, with advice becoming increasingly specialist.”
Richard believes 2023 could be difficult to start with, but stresses there is “real opportunity” given that lenders want to lend, housing supply issues, people still wanting to move and current mortgage deals expiring in the coming months.
“It may be the case that the phone won’t be ringing off the hook for advisers, but the predicted market which might be smaller, will offer chances as before for customers, advisers and lenders. I think 2023 offers a real chance for the industry to show it can innovate in terms of credit risk, pricing, and products from lenders, from advisers to invest further in technology to help with the customer journey, both with themselves and with third parties, for the technology companies to continue to offer new solutions to make the whole house buying experience, smoother, slicker and customer centric.
“The answer as we have seen with the recent rise again in tracker mortgages does not always have to be a 2- or 5-year fixed [mortgage]. As the market and customers in it get more complex, the industry has a chance to show that one size does not fit all.”
Richard adds that while 2023 will pose challenges, his organisation has the mindset of “walking towards the problem, not away from it”.
“Communication will be key for all in the market, not only to manage expectations but to be able to deliver for your customers. Indeed, it is the issue of communication for all parties in the market which can help overcome any headwinds.”
Matthew believes we will see greater stability across much of the mortgage market in 2023, but warns that conditions in the buy-to-let market look “tough”, while the wider market is going through “an adjustment”.
“The value of the intermediary will be ever present but it won't be easy for brokers who don't have that big client base.”
Matthew highlights the green mortgage agenda as a key issue for the industry to focus on in 2023, as it is “frankly being neglected” by lenders and government alike, and “practical solutions” are required.
He adds that the mortgage industry can best cope with economic headwinds by diversifying and working with specialist partners.
“Businesses like us in mortgages can help, but also the breadth of other services so often neglected. Now is the time to work with partners. Offer more and turn away less. Make this part of your way of business. Many think they do but few do it well.”
Vikki predicts an “uncertain” year ahead and says this is making people feel nervous.
“There is still a huge amount of maturity opportunity, which should have a significant focus to ensure all customers coming to the end of a rate get the best possible advice. I still feel incredibly optimistic, we are a resilient market with an ability to harness opportunities.
“Consumer duty is inevitably going to be a huge focus for lenders and distributors alike. This work will have to be done and embedded. But aside from this, we should be seeking new product opportunities that work for new and emerging markets, which are likely to come to the fore as economic conditions unfold.
“It’s about agility and being fully equipped to be able to harness opportunities in new markets and customers changing circumstances. They should look to upskill and be prepared for a broader need for advice.”
Neil believes 2023 could be challenging in a number of ways, as inflation and the rising cost of living could affect buy-to-let and purchase volumes. At the same time, product transfers could be “a blessing for many”.
“We know that we have some large maturities next year and expectations are that lending will be down, by how much is a guess. The impact of consumer duty on the market remains somewhat of an unknown but I believe that lower volumes and delivery of consumer duty may drive opportunities for growth in digital that really do support growth in the market later in 2023 and beyond.”
Neil says that the industry needs to focus more on green mortgages in 2023, not only in researching and promoting products, but also in the communication and information that is available for advisers and consumers to help make informed decisions.
He adds that the cost of living crisis could potentially “impact a huge proportion of customers”, which means “being in a position where lenders and advisers are working together to help provide information and/or access to information will be a great position for everyone involved in our industry.”
Adrian says that while the industry was prepared for the end of Help to Buy, cooling demand and an increase in interest rates, it didn’t expect it to happen so quickly.
“More positively, as we move into 2023, we think that there remains a cultural bias towards home ownership in the UK, that there is an undersupply of homes, and that a competitive, well capitalised mortgage market will help support transaction levels. We acknowledge that higher interest rates and inflation will make the market tougher but that is where the incredibly strong intermediary sector comes into its own by helping to put our mutual customers in a position to buy a new home.
“The best solutions are almost always collaborative. Lenders, brokers and house builders have a mutual customer who should be at the centre of their thinking, so it seems likely that by working more closely together, we can deliver the best outcomes for them.”
Adrian adds that the industry needs to focus on affordability in 2023, as “the balance between responsible lending and supporting customers who can afford the repayments is not easy”.
Climate change is flagged up as another priority that should be “high on every business’s agenda”.
“From a housebuilder’s point of view, the Future Homes Standard will mean significant changes in the way we build homes and that customers live. Lenders will be required to report on the risk posed to them by securing mortgages on housing stock that is increasingly not fit for purpose in a changing world, and assess risk accordingly. There is a lot to be done before the industry can fully understand the challenges that this poses and provide appropriate solutions.”
Kelly hopes the market will “settle down more” in 2023, with more stability when it comes to interest rates.
She says supporting product switches and remortgages is going to be key, while the industry needs to look at ways of automating product data changes. This will ensure “data changes are timely and accurate, plus continue the push on connectivity for obtaining decision in principle and full mortgage applications”.
“Lots of collaboration and effort has helped the mortgage journey at the front end (i.e. affordability tools, quicker DIP decisions, through to full FMA and offer, but further consideration is also needed for post offer, at the conveyancing stage, as it's still a pain point. New players in this space such as Coadjute and Pexa, along with existing stakeholders like LMS and eConveyancer, are looking to offer more efficient solutions, so hopefully we will see greater adoption here also over the next 12 months.”
Kelly adds that the cost of living crisis is “going to continue”, which when coupled with many borrowers' fixed rate deals ending in 2023 and interest rates being much higher, means “it's going to be a real struggle for many homeowners”.
“Brokers can really help to support those struggling, providing the advice people need to find the best deal to remortgage and potentially looking at extending their term to bring payments down.”
In reference to high interest rates in the future, Jackie shares the concern of many:
“First time buyers might choose to sit on their hands for a few more months and similarly potential home movers could batten down the hatches during the winter months under this cost of living storm.”
Despite this cause for concern, Jackie notes some reasons for optimism in the coming year:
“Advisers can still provide value to their clients in the form of remortgages and product transfers. With the backdrop of high interest rates, securing a good deal for these types of clients becomes more valuable than ever. There is no sugar coating that it could prove to be a difficult year for everyone, but as already shown, we are a resilient industry.
“Looking further ahead though as the cost of living crisis hopefully subsides the lack of stock in the market will mean the housing market naturally picks up.”
For Stephanie, 2023 will be a tale of two halves: “2023 will be a challenging year, with the second half being more positive than the first as conditions (hopefully) start to improve”.
How should advisers look to interact with clients in the new year? For Stephanie it’s a matter of proactiveness and opportunity: “It will definitely be a year of refinance, this offers a fantastic opportunity for advisers to keep in touch with their entire client bank. Due to the cost-of-living crisis, advice will be key for customers who are looking for help with the potential payment shock”.
Proactiveness is a theme that reappears when we talk to Stephanie about tackling industry headwinds in 2023: “Consumer Duty will impact all businesses across the industry as we move into 2023 and this picks up at pace. We have to be collaborative wherever possible to ensure all parties meet the FCA’s deadlines. (We need to ensure) none of us duplicate work unnecessarily and advisers are fully supported with guidance on the work needed”.
What does 2023 look like for David? Well, we can certainly expect a slowdown in activity and demand as “prospective buyers take a wait and see approach”.
Of course this is dependent on many moving parts. “Much will depend on how consumer confidence recovers and I expect that a good deal of that is likely to come down to mortgage rates. Although base rate is expected to keep climbing in the near term, the expected peak is now easing to a lower level than previously anticipated.
“Although rates won’t be dropping back to the sub 1% lows, an easing back in rates will at least help borrowers recover from the panic that stemmed from the spike to 6% or more that fed through in October/November.”
On the more specific areas the industry needs to focus on David expects a substantial number of maturities in the next year: “Remortgage borrowers will be keen to understand what their best approach will be when they are likely to come off lower rates. Underlining the benefits that come from seeking advice will be important, helping customers understand the overview across the market, including that of the product transfer options from the existing lender.”
Whilst Jeremy does expect a smaller market in the next year, advisers and brokers will still play a vital role for the customer… “Customers will need advice more than ever, as their choices will have a significant impact on their finances”.
It’s a great time for brokers to build trust and gain loyalty from their customers after “helping them navigate decisions they’ve not had to make for many years in a higher interest rate environment”.
On the topic of industry specific focuses in the coming year, Jeremy believes brokers and lenders must work closely to navigate through “the big topic of consumer duty that will affect everyone”. Equality, Inclusion and Diversity will continue to be a salient issue in the next year too. “I would recommend checking out our Growth Series which has a range of information and support to make your business more inclusive, and all the benefits that brings.
“Don’t think either of these topics don’t apply to you…..They do!”
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