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Three mortgage trends to look out for in 2022

by John Saunders
14th Dec 21 9:53 am

Despite the pandemic, 2021 mortgage lending hit a 14-year high of £285 billion according to revised figures from the Intermediary Mortgage Lenders Association (IMLA). This isn’t simply an uptick due to coronavirus restrictions easing either — during the first five months of the year, mortgage lending was not just 87% above the same period in 2020, but 51% higher than the first five months in 2019 too.

With the UK mortgage sector in a great place and people seemingly in a strong position to get onto the property ladder, there’s scope for industry innovation and changing consumer habits. With that in mind, what mortgage trends are set to take off in the new year?

1. A rise in remortgaging and second charge mortgages

With high inflation levels at the moment (beyond 5% when the Bank of England’s target is 2%), interest rates remain at a record low. But with these likely to rise at some point in 2022, Simon Jackson at Mortgage Introducer notes that “we are now living in what is likely to be the low-water mark for mortgage pricing”. Consequently, “advisers are pushing at an open door in terms of saving clients money on their remortgage”, meaning we should expect more people to take advantage of these low interest rates in 2022 while they can.

Meanwhile, James Rainbird believes that the second charge mortgage market is going to grow in importance considering the rise in living costs caused by the economic fallout of the pandemic. As loan.co.uk explains: “Second charge mortgages are like remortgages, but, well, not…”. Instead of applying for a new mortgage, they are “a type of secured loan designed especially for homeowners”, in which “you use the percentage of the property you own outright as collateral to borrow more money.”

With people’s pockets being hit by growing inflation levels, yet housing prices simultaneously moving upwards, accessing those equity levels via a second charge mortgage can help existing owners with their lending needs.

2. Green mortgages to hit the mainstream

UK houses account for over a fifth of the country’s total CO2 emissions. However, green mortgages still haven’t hit the mainstream, with 94% of brokers yet to sell one. This type of mortgage is one where the buyer or owner of an energy-efficient property is rewarded with more favourable terms than come as standard.

This usually means either receiving a lower interest rate or cashback when somebody obtains the mortgage, or both. Some lenders also offer existing customers additional borrowing at reduced rates to fund green home upgrades like insulating their loft, installing solar panels or draught proofing.

However, despite the lack of uptake of green mortgages thus far, the government’s eagerness to support the development of a competitive market in this field as part of its net-zero strategy could invigorate it. A key part of this is plans to link mortgages to green home improvements by imposing targets for banks and building societies. With eleven of these entities already introducing green mortgage schemes of their own accord since 2020, don’t be surprised to see more do the same and green mortgages becoming all the rage in 2022.

3. Digitalisation of the mortgage industry

Digitalisation is becoming increasingly crucial to companies across all industries, offering benefits like greater processing efficiency, lower transaction costs and better control of business operations. The mortgage market is no different.

As Financial Brand remarks about those in the sector: “successfully catering to changing needs of millennial customers in particular will require digital transformation of the entire mortgage chain”. The publication cites that “mortgage providers that spent on digital infrastructure capitalised on their investments during the [pandemic] crisis, while those tied to physical paperwork lost new business.”

Consequently, it’s likely that 2022 will see more of those in the mortgage industry follow suit and digitalise in order to keep pace. They can do this in so many ways, including providing fully digital mortgage application processes, offering 3D virtual property tours and harnessing virtual loan lending assistants.

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