Let’s get innovative

If the last 12 months has taught us anything, it is that nothing stays the same forever. Rising inflation, soaring energy prices, a cost-of-living crisis and three Prime Ministers are just some of the dynamics the UK has faced over the last year, which has ended in millions of households experiencing a squeeze on income unseen for a number of decades.

Against this backdrop of change, the UK mortgage market has experienced a significant period of volatility, with product withdrawals, pipeline delays and rising concerns about affordability creating a tumultuous environment where uncertainty and anxiety have become the norm.

With the dawn of a new year upon us, and predictions of further challenges ahead, many brokers and lenders will be entering a new year wondering what 2023 has in store, with affordability concerns in particular, top of mind.

However, instead of wondering what lies ahead, perhaps it is time the mortgage industry took the lead and started to steer the sector in the direction it wishes it to go? The market is crying out for innovation and with the low interest rate environment of the last 14 years a thing of the past, there has never been a better time for the industry to come up with innovative ways to help people get a foot on the property ladder.

For too long, the industry has been reliant on government-led initiatives such as the Help-to-Buy scheme as a mechanism for enabling FTBs to buy their first home, but with interest rates predicted to continue to go up and with the HTB stimulus no more, fluidity in the market looks set to disappear and stifle future growth.

This is a grave concern and it is up to us as an industry to ensure that doesn’t happen by designing solutions that harness the equity held in the UK’s housing stock and creating more intergenerational lending products to leverage further growth.

According to Savills, the value of the UK housing market hit a record high of £8.41 trillion at the end of 2021, and further data from the ONS shows that 36% of properties in the UK are owned outright. This means there is a significant amount of equity held in UK property that could potentially be tapped into should lenders be brave enough to get creative with their product solutions.

Products such as Barclays Springboard, which allows family or friends to transfer 10% of the property price into a savings account as security for a house purchase and thereby enabling the borrower to buy their home without a deposit, is a great example of innovation in the market, particularly as saving for a deposit is the number one challenge facing FTBs.

Other solutions include Joint Borrower Sole Proprietor mortgages which allow two or more people to pool their income therefore increasing the borrowing potential of the applicant is also offered by a selection of lenders, but it is still not enough.

These solutions remain under-utilised and we need more lenders to jump on board and develop products that maximise the low debt to equity profile of the UK’s housing market. Products that enable parents and grandparents to unlock the equity in their properties now rather than when they die, will not only minimise their inheritance tax liability it will also help to further stimulate growth in the market by providing many FTBs with the deposit they need to get on the property ladder.

The mortgage market is screaming out for innovative and forward-thinking solutions that tap into the asset value of the multi-million pound UK housing market, and with the low interest rate environment behind us, and government stimulus also a thing of the past, it’s time the industry taps into that wealth by creating 21st century solutions for the modern day consumer that continue to stimulate and invigorate the mortgage market’s growth.