Why are lending appetites defying political uncertainty?

Theresa May will quit as Conservative leader on 7 June, paving the way for a contest to decide a new prime minister, and reports suggest that a decisive showing by the Brexit Party in the European Parliament elections could further complicate the UK’s departure from the European Union. We are now, at the time of writing, five months away from the new Brexit deadline and there are still more questions than answers – so how is this lingering uncertainty affecting the mortgage market?

Thankfully, data suggests that optimism levels remain reassuringly high – at least within the intermediary marketplace. Research from Paragon outlined that the first quarter of 2019 was one of the busiest periods for mortgage intermediaries in the last ten years. On average, each mortgage office in the survey introduced 24.5 mortgages in the first quarter, up by 6% from 23 mortgages in Q4 2018 and by 10% compared with Q1 2018. This placed current activity levels close to the ten-year high of 25.2 mortgages recorded in the final quarter of 2015.

In addition, the latest Broker Sentiment Poll from United Trust Bank revealed that four out of five brokers (81%) are pursuing plans for their businesses regardless of what happens with Brexit. However, 1 in 10 (9%) were said to be putting plans on hold until the nature of Brexit is much clearer and a further 8% are pursuing a more conservative plan due to Brexit uncertainty. Just 2% are implementing more aggressive growth plans. This data helps highlight that – despite some challenging conditions and ongoing concerns – confidence, demand and opportunity remain evident throughout the intermediary market.

Which leads to the next question – how and where is this positivity being generated?

The remortgage market remains an important area for all mortgage intermediaries. This includes activity within the buy-to-let sector, as increased competition is generating even stronger levels of remortgage business for both existing limited company buy-to-lets and for individuals looking to transfer their investments into this type of structure.

The more specialist ends of the residential and buy-to-let markets have been key growth areas over the past six to 12 months, and this will remain the case leading up to any Brexit decision and beyond. Many buy-to-let lenders have extended their offerings into areas such as limited company, lending on houses in multiple occupation and expat buy-to-let in a bid to diversify their offerings, meet client demand and embrace shifting market conditions. Many of these lenders, as well as many smaller building societies – and even some mainstream lenders – are also opening their doors to the more complex end of residential lending through tweaking criteria and affordability calculations.

Risk will inevitably play a large part in any individual lending approach, which could inevitably be tempered by any negative Brexit fall-out. However, lending appetites currently remain strong throughout the specialist and mainstream lending markets to help drive even more business through intermediary channels.

If only the road to Brexit was looking so positive...