Bank of England mortgage approvals and consumer credit

Demand for mortgages remains extremely high. However, this is mainly due to the panic and fear of clients trying to secure new rates as soon as possible due to the fear that they will keep on rising. We’d expect the second half of 2022 to remain much the same with people rushing to secure new deals before rates rise further. The criteria of lenders are constantly evolving and with the rising cost of living this is certainly going to impact lenders' decision on how much they will potentially lend a customer. We’re also starting to see more borrowers come who have had a reliance on revolving credit such as credit cards to fund their everyday living off the back of the cost of living crisis. This could soon become a slippery slope for many who may struggle to find their way out of that debt. The number of people in financial difficulty is sure to start snowballing soon. Many people are already in difficulty but are burying their heads in the sand or trying to fund everyday living on credit cards, which could end in disaster.

We're expecting mortgage demand to drop considerably in the second half of the year. The noises from the Bank of England indicate we might get a 0.5% increase in the base rate on August 10th. And some analysts are suggesting the base rate could be as high as 3% by the year-end. If that comes to fruition, mortgages will be unaffordable for a lot of first-time buyers, and house prices will start falling fast. The banks will probably be OK, thanks to tighter financial regulation and increased liquidity controls. But it's the general public who will once again pay the price of our extended addiction to cheap credit.

Demand has still been very strong in recent months. I think many in the mortgage industry were shocked when demand did not drop off after the deadline for the stamp duty holiday. Based on that, I think mortgage demand will still be high in the second half of the year, more so among landlords and investors rather than first-time buyers due to the cost of living crisis. Bizarrely, perhaps, it is often easier to secure a mortgage now compared to a year ago. We are seeing more lenders offering higher income multiples, being more flexible on the amount of time you have been employed or self-employed and generally being far more flexible around adverse credit. Secured loans, or 'second charges', are becoming more common for debt consolidation. Many households are having a difficult time and are using secured loans to consolidate unsecured and credit card debt so they can repay this over a longer term and create more disposable income to spend on the bare necessities. Almost every credit report I see now has some form of adverse credit, it is a rare and wonderful surprise to see someone with perfect credit and I know many adverse credit brokers who are absolutely overrun with applications at the moment where most of the credit scores are 200 out of 1000. There's no question now that more people will be entering a period of real financial difficulty.

I'm seeing more and more people wanting to increase their mortgage to clear their debts. They think that if they can secure a lower mortgage now and clear the decks of debt, they can move forward with a clear head. Robbing Peter to pay Paul comes to mind but for some this seems the best option. Hang on to your hats for the winter months.