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Comment: Help your clients to get real

Comment: Help your clients to get real

Stewart-Simpson-2023Now that the shock of recent rate rises is starting to settle, many homeowners are coming to terms with the new reality.

For those who have recently remortgaged, the payment shock of the new rate environment has had a tangible impact on their monthly finances. For many, this has entailed adjusting their future plans.

For those who hoped to move home and progress up the property ladder in the near future, it has meant deciding to stay in the current property and explore opportunities to extend that property to meet changing living requirements.

Millions are still on a fixed rate and yet to feel the impact

In fact, we’ve seen enquiries for second charge mortgages to fund home improvements from customers who have actually cancelled plans to move before remortgaging onto a higher rate. Even during the research process of looking at larger properties, the reality of higher mortgage rates and the subsequent impact on monthly payments has made people reassess their expectations and ideas about what is achievable.

For others, remortgaging onto a higher rate and larger monthly repayments has provided an impetus to address their finances and streamline their outgoings through debt consolidation, which continues to be an area of significant customer demand.

Increased strain

The fact remains, however, that there are still millions of homeowners sitting on existing fixed-rate mortgages for whom the impact of rate rises is yet to be felt.

With the increased cost of living, many of them will be turning to credit to pay for their monthly essentials and, under this increased strain, the finances of many households are starting to crack. According to Which?, it’s estimated that 700,000 UK households missed or defaulted on a rent or mortgage payment in April.

It’s time for everyone to adapt to the new environment

As living costs continue to climb, it’s difficult to envisage this number doing anything other than get worse and, while the specialist market continues to offer options, increasing incidents of adverse credit will make it harder for your clients to secure a mortgage in the future.

Now that the dust has settled following the mini-Budget last autumn, it’s time for all brokers to look at the bigger picture. The rate rises may have arrived more quickly than most people anticipated but this isn’t simply a blip — it’s a return to a new normal.

Ultra-low mortgage rates were an historical anomaly. It’s time for everyone to adjust their expectations and adapt to this new environment.

Be proactive: get in touch with your clients and start the conversation

For many, this adjustment is likely to be painful — including for brokers. The next couple of years are likely to bring fewer property transactions and, while the remortgage market is being talked up, product transfers are likely to eat into some of this business, particularly among clients who believe they have no other alternative because of their credit record.

However, brokers also have an opportunity during this period of adjustment.

Homeowners have a very limited understanding of the options available to them. You are the experts they rely on, and you have access to products that may provide a solution that enables them to restructure their finances to put them in a stronger position in the future.

It’s estimated that 700,000 UK households missed or defaulted on a rent or mortgage payment in April

Be proactive: get in touch with your clients and start the conversation. This could be a very useful step for your business and it might be absolutely vital for the finances of your clients.

After the shock of the past few months it’s time to look at the bigger picture and take active steps — for the good of both your clients and your business.

Stewart Simpson is second charge mortgage specialist at Brightstar Financial

This article featured in the June 2023 edition of MS.

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The post Comment: Help your clients to get real appeared first on Mortgage Strategy.

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