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Fewer mortgages available in rest of 2022 - forecast

Mortgage activity is forecast to fall by six per cent by year-end as the market feels the brunt of interest rate hikes. 

And specialist lending is set to fall by a much larger proportion.

Mortgage brokerage Henry Dannell analysed lending data from the past decade as well as that from the first six months of this year: it found that activity peaked in 2021 when the market was the busiest it has been in a decade. 

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This peak was largely driven by Monetary Financial Institutions which are, broadly speaking, the traditional high street lenders such as banks and building societies. 

MFIs processed 1.486m mortgage transactions in 2021, accounting for 89 per cent of the total mortgage market. This marked an annual increase of 17 per cent.

Alongside MFIs, specialist lenders - firms focussing specifically on providing alternative home loan solutions to borrowers unable to meet criteria set by mainstream mortgage lenders - also saw a significant interest in mortgage activity, rising by 19 per cent since 2020 to process 151,000 transactions. 

This is, however, just nine per cent of total mortgage lending activity that year. 

Despite this small market share, 2021 does still mark a high point for specialist lenders as they processed the most annual mortgage transactions on record, likely due to the economic impact of the pandemic forcing borrowers to look for new ways of securing loans.

Notwithstanding this 2021 boom, rising interest rates are likely to dampen the mortgage market in 2022, with Henry Dannell forecasting a six per cent drop in MFI activity and a 16.5 per cent drop in specialist lending.

Henry Dannell director Geoff Garrett says: “2021 marked a high point for the mortgage market. The government’s pandemic intervention on the housing market, such as the stamp duty holiday, led to a surge in buyer demand that enabled lenders to grant more mortgages than ever before. 

“But as we enter the second half of 2022, confronted with a cost of living crisis and aggressive interest rate hikes, we can safely expect a significant decline in activity for both MFIs and specialist lenders. 

“However, people often turn to specialist lenders in times of economic turmoil as they are more willing to take a chance on them. 

“As we move further into this current cost of living crisis with families struggling to pay bills and meet loan repayments, we could well see a stronger performance where the level of mortgages coming via specialist lenders is concerned.”

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