Affordability and debt consolidation dominating broker searches: Knowledge Bank

In a month that saw the Bank of England raise interest rates by half a point to 5% in an attempt to curb inflation, the latest criteria index from Knowledge Bank underpins the financial burdens that many are carrying in the UK.

In June the persistent trend of ‘missed or late payments’ trended for a ninth successive month in the residential sector.

There was also an increase in searches relating to the ‘maximum age at end of term’ as brokers and lenders explore ways to help borrowers extend mortgage terms or move to interest-only options on a short-term basis.

Jeremy’s Hunt’s recent crisis meeting with banks and building societies resulted in an agreement to assist borrowers, which should provide some breathing space for the families at risk as well as the 400,000 households due to come off fixed rates between July and September. However, it is likely to significantly increase the number of in-bound calls from borrowers looking for help from brokers or lenders.

Searches within the second charge sector also revealed a surge in individuals seeking solutions to their mounting financial issues.

June also saw an increase in searches for lenders who assist homeowners with ‘capital raising for debt consolidation’ underpinning the financial burden carried by many households. A search for ‘interest-only mortgages’ coming into the top five for the first time since June last year also shows the pressure people are under to make their debt more affordable.

In the equity release category, June searches indicate a notable resurgence in interest for 'leasehold remaining term,' 'early repayment charges' and 'ex-local authority houses'. These trends suggest that individuals who bought their council flats two to three decades ago might be exploring their options. It is plausible that pensions are no longer sufficient to cover their expenses, leading more people to explore equity release as a viable solution to ease financial situations.

In the buy-to-let sector, a new term coming into the top five this month was whether lenders would offer buy-to-let mortgages to first-time buyers.

In comparison to the challenges in the residential and buy-to-let markets, both bridging and commercial were remarkably consistent, with the same top five searches for the past three months – both leading with ‘minimum loan amount’ and ‘maximum LTV’.

Knowledge Bank CEO, Nicola Firth, said: “Amidst the mounting financial challenges faced by borrowers, many are desperately seeking assistance with their mortgage terms and additional borrowing for debt consolidation.

“Brokers are exploring options to ease their clients’ financial situation. For borrowers transitioning from a fixed rate, the prospect of moving to a significantly higher rate is particularly onerous. Broker searches on Knowledge Bank evidence that borrowers are resorting to every possible means to find solutions for their clients. Considering ways to extend mortgage terms, exploring second charge interest-only options, and using second charges to raise much-needed capital for debt consolidation.

“The crucial role of brokers in assisting both existing and prospective borrowers has never been more important. At the same time, brokers are encountering unparalleled challenges in their efforts, as they navigate rates that are being pulled every few days, and an extensive array of criteria to locate a lender capable of providing assistance. The task of finding a lender who can offer the necessary help has become increasingly demanding.”