Is the mortgage market set for a slump in 2022?

by | Monday 10th Jan 2022 | Mortgage News

People discussing the mortgage market

2021 saw an astronomical increase in properties going on the market and new buyers looking for mortgages. Due mostly to government housing initiatives introduced post COVID, it looked as if brokers and estate agents were working in overdrive. To back up this point, the Intermediary Mortgage Lenders Association (IMLA) released figures in their annual report that show that in 2021 the total value of housing transactions reached a whopping £370 billion. However, figures so far have already suggested that this is falling fast already in the first 10 days of 2022 and is due to fall even further as the months and years go on.

What does the mortgage market report show?

In their 2022 report, the IMLA predicts that there will most likely be a decrease in gross mortgage lending to £275 billion this year, with a further fall to £265 billion in 2023. There may be several factors for this but the most widely accepted one now is the direct result of the government withdrawing the support they gave during the COVID 19 pandemic’s early days such as stamp duty holidays and employment/self-employment support. With these initiatives being withdrawn, the prospect of large stamp duty bills on top of deposit and moving costs is starting to look less and less appealing to potential home movers. Although not mentioned in their report, we at Oportfolio think that there may also be some other factors in play. The first being the increase in mortgage rates.

What does this mean?

Although mortgage rates are still very low and the increase introduced a few weeks ago was not a huge one, we feel that there may be a lot of buyers (especially inexperienced first-time buyers) we have been rattled by the rate increase. We think that there will be thousands of perfectly able new buyers who are keeping away from the mortgage market due to a fear that rates will become unmanageable which, in our opinion is false. We also believe that the decrease in mortgage activity can also be organic because of the lockdowns coming to an end. Being confined to your flat/house/bedsit over the lockdowns of 2020/2021 got a lot of people thinking about moving and finding a bigger space or a place that was more accommodating for the new normal life they are living.

2020 and 2021 saw an unbelievable amount of people searching for a new home and as a result, house prices have and continue to grow however, we think that the demand for moving has slowed as people begin to come out of the lockdown panic phase and return to their places of work and social hotspots. In our opinion, people are losing the focus on finding a new home and prioritising spending time with family and friends and getting out and about. Possibly because of this, the IMLA predicts that 2022 will be a much stronger year for the remortgages market.

What are the predictions for the future?

IMLA predicts that the remortgage market will reach £89 billion in 2022, compared to £82 billion in 2021. They also attribute this to lenders prioritising house purchase lending during last year’s stamp duty holiday and now that this is due to decrease, lenders will focus more heavily on the remortgage market.

Whatever you are looking to do this year, whether it’s buy a property or remortgages your existing, the best thing you can do is speak to an advisor to discuss your options and how you can make the most out of your 2022. Give Oportfolio a call now on 020 8877 1169 to get the ball rolling.

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