The Mortgage Lender Economic Update

by | Wednesday 8th Nov 2023 | Mortgage News

In a recent economic update sent out to mortgage brokers, The Mortgage Lender (TML) painted a sobering picture of the current economic landscape, highlighting several challenges that are impacting the mortgage market and the broader economy. As part of the PRIMIS Mortgage Network, Oportfolio Mortgages has access to the latest updates and insights from lenders such as TML. As we explore their insights, it certainly seems that the road ahead may be more challenging than initially anticipated.  Here is a roundup of the TM Economic update and our own opinions as mortgage brokers.

The Mortgage Lender Highlights Economic Resilience and Cracks

TML acknowledges the remarkable resilience of the UK economy amidst unprecedented monetary tightening. However, cracks are beginning to appear it seems. Consumer confidence dipped in September, and October’s purchasing managers’ survey which suggests a continued threat of recession. TML stance aligns with the Bank of England’s view, predicting no growth in 2024.

Monetary Policy and Interest Rates: The Mortgage Lender Insights

While the Bank of England maintained the Bank Rate at 5.25% in November, they hinted that the next move is more likely to be an increase according to The Mortgage Lender. Market sentiment and most economists concur that rates won’t start falling until the following summer, but could they really increase? We at Oportfolio tend to think that no more rate rises are on the cards in the immediate future.

Inflation and Interest Rates

Inflation has proven stubborn, with prices rising 0.5% in September. Factors such as rising fuel prices and hotel room rates prevented a more significant decrease in the headline inflation rate. However, the recent 12% drop in the energy price cap is expected to help lower headline inflation. The economy is already grappling with issues, with more mortgage holders likely to feel the impact.

Housing Market

The evolving expectations regarding the Bank Rate have led to a re-evaluation of house prices’ affordability. It is now easier to argue that house prices are not significantly overvalued. Despite this, it remains uncertain whether prices will drop further, as TML predicts a potential 5% decline. Surveyors seem to agree with this projection, although there is no conclusive regional pattern. Strong wage growth suggests that adjustments could occur through higher incomes rather than falling prices. However, concerns about financial stability loom with higher and more prolonged interest rates.

Mortgage Market Activity

Despite improved affordability with many mortgage lenders, there’s been no uptick in mortgage approvals according to TML. Buyer interest is still declining. This indicates that prices may not have fallen sufficiently to restore a more balanced market and encourage buyers to come back. While the average price for first-time buyers has decreased, the rising rates have increased the average income needed to enter the market. The market may remain stagnant until incomes increase sufficiently to restore affordability according to TML.

Mortgage Market – Rates

With financial markets anticipating that Bank Rates will remain high for a longer duration, the potential for significantly lower mortgage product rates is low. The margin between new business and risk-free rates is also expected to widen further. This presents an opportunity for those who have been postponing mortgage decisions, as lower product rates may encourage them to act.

Speak To An Expert Mortgage Broker

TML’s economic update provides mortgage brokers with valuable insights into the current economic challenges and their potential impact on the mortgage market. While the UK economy has shown resilience, concerns regarding inflation, interest rates, and housing market stability are still very much at the front of people’s minds. As mortgage brokers navigate these turbulent waters, staying informed and adaptable will be essential to help their clients secure the best mortgage deals in a complex and evolving financial landscape. If you have any questions about a potential mortgage, then please feel free to give us a call today or drop us a message. We are here to help.

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If you have any questions about UK mortgage news or or anything you’ve read then please get in touch. We’d love to hear from you.

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