Mortgage brokers are feeling optimistic about the residential market, with expectations for interest rates to fall amid access to larger loans, a survey from a bank found.
HSBC’s Broker Barometer polled over 1,100 advisers in July, finding that 78% identified an increase in the amount of lending agreed for clients looking to purchase or remortgage.
This is a result of regulators confirming the flexibility around affordability assessments and allowing lenders to increase loan-to-income (LTI) caps.
One in 10 said the increase in the loan sizes available was ‘significant’.
HSBC recently adjusted its stress rate and has estimated that this change would allow first-time buyers to access loans of up to £39,000 more than previously offered. This would represent around 20,000 applications.
According to the Broker Barometer, 93% of respondents said it was important for clients to increase their borrowing abilities.
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Nearly two-thirds – 63% – of brokers said clients were actively improving their credit score to access the mortgage market. This was a rise of 12% on the last survey, which HSBC said hinted at growing consumer awareness.
Favourable outlook for the residential market, muted expectations for BTL
Some 63% of brokers believed the volume of residential mortgage applications would increase over the next six months, while 12% felt this would be a significant rise.
More than half – 51% – of brokers said the rise in applications would be ‘slight’, some 13% more than the last Broker Barometer survey in April.
However, brokers were less optimistic about the buy-to-let (BTL) market, with respondents expecting activity to remain flat. A fifth said business would go up, while a quarter predicted a decline in BTL applications.
Feeling good about the economy
The survey also revealed a favourable outlook for the economy over the next 6-12 months. Some 78% of brokers said their confidence in the economy was at a five or above out of 10, with the higher score showing they were ‘extremely confident’. This was notably higher than the 62% who said the same in the first Broker Barometer.
Around 29% of respondents said the base rate being held at 4.25% had a good impact on the mortgage market, and two-thirds said it would be neutral.
Just 5% of brokers said this would be negative for the mortgage market.
Looking forward, 87% said they expected more base rate cuts this year.
Despite this confidence, brokers still showed some concerns around the potential impact of geopolitics. However, worries about this were less prevalent than in the last poll.
Chris Pearson, head of intermediary mortgages at HSBC UK, said: “The recent adjustments to stress rates by lenders are clearly making a positive and tangible impact. This Broker Barometer shows that almost eight in 10 brokers are seeing an uptick in the amount of lending agreed for their clients.
“This is a crucial development, as it directly translates into enhanced buying power and greater accessibility for aspiring homeowners, reflecting a more responsive market.”
Sustained mortgage broker happiness and commitment
HSBC found that mortgage brokers were happy in the profession for the most part, with 68% rating their happiness level at a seven or above. This was consistent with the last survey.
Brokers also expect to stay in the industry for most or all of their career, similar to the previous survey, with eight in 10 feeling this way.
Most brokers said they planned to retire between the ages of 65 and 74.
There was an almost 50/50 split between brokers who worked weekends and those who did not, with 53.8% only working during the week. HSBC found that contentment with work did not correlate with brokers working weekends or not.
Engaging with AI
Some 70% of brokers are either introducing artificial intelligence (AI) into their business or plan to in the future.
Of those firms that have already implemented AI, brokers cited better client engagement, operational efficiency, and faster processes.
Brokers are also using AI for administrative tasks, such as letter writing and their social media presence.
Still low uptake of green mortgages
According to brokers, just 8% of mortgage applicants are actively looking for green mortgages or products that acknowledge energy efficiency.
A quarter of brokers said the amount of cashback available on a green mortgage was a deciding factor for clients applying for one.
Respondents suggested that residential applicants were more interested in green mortgages than landlords, with more than double the number of brokers saying there was interest from residential clients than from landlords.
Some 34% said borrowers were more open to making energy-efficient upgrades to the property they were purchasing.
Pearson said it was “encouraging” to see a “palpable increase in optimism”, especially around the residential market and the economic outlook.
He added: “The strong expectation for a reduction in the Bank of England base rate signals a potential easing of pressure for borrowers and could further stimulate activity at both a market level and individual broker level. While there are a number of factors that determine mortgage rates, including international swap rates, the base rate remains an important economic indicator, often being one of the main drivers of economic confidence.
“While mortgage rates are the main concern for brokers at the moment, the proactive steps clients are taking to improve credit scores and the increasing, albeit mixed, interest in green mortgages highlight a dynamic and adapting market. We remain committed to supporting brokers and their clients through these evolving times, including exploring how technology like AI can enhance efficiency and customer experience.”
