Why 2023 is the year of the broker

A new year is the perfect time to start afresh and for the mortgage industry this means taking stock of where the market is currently at and the direction in which we would like it to go. The last 12 months have been tumultuous to say the least, with global and domestic geopolitical forces impacting the financial markets and causing inflation to soar, energy prices to rise and interest rates to hit levels unseen for at least 14 years.

This has placed significant pressure on the household budgets of many consumers and as we enter 2023, there is no doubting the fact that millions of people across the UK are going to face financial challenges like never before.

For many homeowners coming off cheap fixed rate mortgages, this means their monthly mortgage payments are likely to increase, with calculations showing that those coming to the end of a two-year fix of 1.5% on a £250,000 20-year term mortgage in 2023 and onto a new two-year fixed deal with a rate of 4.75% for example, seeing their monthly payments increase from £1,206 to £1,616 per month, an extra £4,920 annually.

First-time-buyers, still grappling with saving for a deposit, are also likely to experience significant challenges, with their dreams of homeownership moving further out of reach as the rising cost of funds impacts their affordability calculations, subsequently reducing their borrowing capacity and their purchasing options.

The good news for brokers is that in the face of adversity, the value of advice has never been more important. Most consumers, so used to operating in a low interest rate environment, will need educating on what the new normal looks like and this responsibility lies with the broking community.

In many cases, this will mean resetting expectations and educating clients on the impact of higher borrowing costs and what this means for their lifestyle choices. It also means that brokers have to work harder than ever to safeguard their clients’ assets and ensure they get the best deal at a price they can afford.

The days of cheap fixed rate mortgages are gone, so opting for a low-rate two-year fix is unlikely to still be the cheapest option. Instead, brokers now need to ensure they scour the market for the most suitable option for their clients and consider every single mortgage offering.

While a fixed rate product may still be the best option for some, for others a discount, tracker or variable rate mortgage might actually prove to be a better option. Or perhaps a shorter-term would be more preferable? There is also likely to be an increase in the number of clients moving onto a product transfer with their existing lender, so doing the groundwork to ensure this is the best option will be crucial.

For first-time buyers, it may be time that brokers start to explore the more innovative product solutions such as those that draw on the savings and equity of family and friends. Products such as Barclays Springboard and Joint Borrower Sole Proprietor (JBSP) mortgages that combine borrowing power are both under-served and under-utilised in the market, yet could provide the stepping stone needed to get that all important foot on the property ladder. Perhaps 2023 will be the year that we see more products of this kind enter the market?

Whatever the next year holds, there is no doubt that the role of the mortgage broker and the importance of advice remains paramount. Borrowers, seeking ways to mitigate the rising cost of living and tightening purse strings, will need our knowledge and expertise more than ever. Ensuring we rise to this challenge has never been more important.