Brexit means it’s never been more important to choose the right lender
Alpa Bhakta (pictured), chief executive of Butterfield Mortgages, a London-based prime property mortgage provider with a focus on UK and international HNW individuals
The United Kingdom’s impending exit from the European Union is set to have a profound impact on the economy, regardless of how Brexit will eventually be managed come 31 October 2019.
Amongst property and finance professionals, conversations are rife with speculation about Brexit’s continuing impact on housing prices. Since the EU referendum, the only certainty has indeed been uncertainty, and this has fuelled hesitancy on the part of consumers, investors and businesses.
We have observed a definite trend for many seeking to either buy or sell prime real estate in London and the South-East to adopt a “wait and see” approach.
In other words, some prospective buyers are refraining from making any long-term financial commitments. While the current climate requires a circumspect approach, it is important to remain realistic about the overall health of the property sector.
Despite many pessimistic predictions, the data suggests that there is still healthy demand for property. Using house prices as a measure of housing demand, the Office for National Statistics notes that the average price of a house in the UK has risen from £214,000 to £228,000 since the EU referendum in June 2016.
Still, for those individuals who are keen to press ahead with property transactions, the importance of selecting an appropriate lender has never been greater.
This is particularly true of the wealthy and ultra-wealthy whose nuanced needs can often pose significant challenges for inexperienced lenders.
More choice than ever
In recent years, the number of mortgage products available on the market has increased substantially. Indeed, data provided by Mortgage Brain indicates that between 2016 and 2018, an additional 4,212 products were introduced into the residential mortgage market. Driving this trend is the increased propensity for existing lenders to diversify their offering in order to cater for a broader range of clients.
Moreover, a new breed of lender is increasingly popular among those demographics who were poorly serviced by the traditional model of mortgage providers. Notably, high net-worth individuals (HNWI) and property investors with large portfolios fall under this category.
This is in line with the findings of an independent survey commissioned by BML earlier this year. The survey, which obtained feedback from over 500 HNWIs, found that one in nine had been denied a mortgage in the past decade. The research also uncovered: 79% think too many lenders are governed by restrictive “tick box” methods when assessing mortgage applications; 60% believe it is becoming increasingly difficult to secure a mortgage for a non-primary residential purchase; and 67% of UK HNWIs have lost confidence in high street banks, feeling they do not cater to the needs of property investors and buy-to-let landlords.
Choosing the right lender
Although the study zeroes in on individuals in one particular mortgage market (HNWIs), the research illustrates the fact that greater choice among mortgage providers often detracts from what’s really important to consumers and investors.
Indeed, it is often the quality of service and the ability to tailor that service to the needs of the individual that is valued highest.
Consequently, it is incumbent upon brokers to assist HNWs and investors in navigating what is an increasingly complex market. BML’s aforementioned study shows that 73% of HNWs rely on brokers to guide them towards mortgage products that are right for them.
Not all lenders are created equal, and given the present uncertainty in today’s property market, it is prudent to be aware of the relative strength, security and adaptability of different lenders.
As reported in January, Brexit uncertainty and increased competition has forced major providers including Secure Trust Bank, Amicus Finance and Fleet Mortgages to withdraw from the lending market.
This dual challenge has served to dent investor confidence in the newer or more niche UK mortgage providers but the outlook remains positive for those lenders with strong funding lines, diligent teams and an established track-record of weathering times of political and economic uncertainty.
Despite all the Brexit uncertainty, the UK’s property market has held firm and, in general, the proliferation of mortgage products reflects the high levels of market demand for secured loans. However, now more than ever, borrowers and their brokers must stay abreast of the different factors that impact upon the stability and solvency of different mortgage providers.
The climate may be challenging, but partnering with secure, established lenders will help to ensure you end up with the right mortgage product for your specific needs.