One of the biggest focal points for brokers this year is the sheer volume of mortgage roll-offs with June seeing up to £40 billion in expirations – the largest monthly total of 2024.
The next major peaks will follow in November and December, marking the anniversaries of the UK’s second lockdown in 2020.
The rate shock facing these borrowers will be significant and lenders’ recent rate reductions appear to be a strategic move to retain existing customers while attracting new ones.
Many of these borrowers may have taken payment holidays, relied on furlough schemes, or used bounce-back loans, potentially leading to adverse credit events such as missed payments or arrangements to pay.
High street lenders are already increasing their focus on this segment, recognising the growing demand for solutions.
BUY-TO-LET SQUEEZE
Buy-to-let landlords are facing unique challenges. Many who secured 2-year fixed rates at artificially low levels in 2022 are now encountering affordability issues.
The stress testing on these loans often required large fees to be added to the loan, exacerbating the financial strain.
Landlords coming off 5-year fixes will also feel the pinch and some may struggle with loan-to-value (LTV) ratios exceeding the 75% cap imposed by most lenders.
SECOND CHANCE
As a result, the second charge market is poised for significant growth in the latter half of the year, as borrowers seek to consolidate debts or restructure their finances.
The cost-of-living crisis is further intensifying financial pressure, particularly for amateur landlords, who may turn to their main residences to release equity in a bid to retain their investment properties.
THE LOST LAND
Another group under pressure consists of older borrowers – those in their late 60s and 70s – who are still on interest-only mortgages, many stemming from outdated endowment products.
For these individuals, the rate shock will be particularly severe, given that they have enjoyed historically low rates for nearly 15 years.
This demographic is likely to face difficult choices, including downsizing or selling properties to children for estate planning purposes, particularly considering rising care costs.
FIRST-TIME BUYERS
We all know that the profile of first-time buyers has shifted dramatically.
The average FTB is now between 38 and 42 years old, significantly older than in previous generations.
Rather than purchasing starter homes, these buyers are entering the market later with families and seeking larger properties, typically two- to three-bedroom homes.
This shift is intensifying competition for mid-sized properties, with demand expected to rise sharply over the next 12 to 24 months.
OPPORTUNITY KNOCKS
With approximately 1.8 million fixed-rate mortgages set to expire in 2024, brokers are facing an immense opportunity – but not without complexity.
Over the past year, at least 25% of borrowers have experienced some form of adverse credit event, ranging from missed mortgage payments to minor infractions such as late phone bill payments or CCJs stemming from forgotten parking fines.
“With approximately 1.8 million fixed-rate mortgages set to expire in 2024, brokers are facing an immense opportunity”
This growing segment is fuelling demand for specialist lenders, particularly if high-street banks fail to accommodate.
THE NEW SUB-PRIME
There are already signs that major lenders are piloting new products to address this market, with at least three of the top six reportedly testing alternative lending solutions.
We’ve been here before. Those top three are reinventing the new sub-prime. There’s nothing wrong in that at all. At Mortgage Soup towers we applaud it. Enabling borrowers to stay on the straight and narrow and enjoy the benefits of home ownership should be applauded – so long as it remains affordable.
LET-TO-BUY DILEMMA
Another subset of borrowers facing challenges are those who engaged in let-to-buy transactions during 2020–2021.
The remote working boom led many homeowners to quickly exit flats in favour of larger suburban properties.
However, these borrowers are now transitioning from historically low residential and BTL rates to a significantly higher rate environment.
STRESS TESTING
Many will find that their BTL investments no longer meet new stress-testing criteria, making refinancing difficult.
For some, the only viable option may be a product transfer (PT), while others may need to explore second-charge loans to manage unsecured debt.
In extreme cases, selling and facing capital gains tax implications may be unavoidable.
Compounding these financial pressures are new energy efficiency regulations, with EPC ratings becoming a growing concern for landlords.
Brokers will need to be increasingly creative in structuring solutions, from term extensions to innovative repayment strategies.
MORE ESSENTIAL THAN EVER
Despite myriad challenges, the next eight months give an unparalleled opportunity for brokers. With £330 billion worth of mortgage product expirations this year alone, demand for expert advice has never been higher.
However, the application-to-completion timeline has evolved.
Historically, this process took eight to 16 weeks, but today, many borrowers are waiting five to six months in the hope of securing lower rates.
LENDER RELATIONSHIPS
This shift is impacting brokers’ fee income and underscores the importance of strong lender relationships and proactive client engagement.
Brokers who invest in strengthening their networks – both with clients and with business development managers (BDMs) at lending institutions – will be best positioned to navigate the evolving market landscape.
The value of expertise, problem-solving and client advocacy has never been greater.
CHALLENGES AND OPPORTUNITIES
The past five to seven years have been anything but smooth for the mortgage industry.
From the introduction of interest coverage ratio (ICR) changes in 2018 to Brexit, COVID lockdowns, the fallout from Liz Truss’s mini-Budget and the ongoing cost-of-living crisis, brokers have navigated an ever-changing landscape.
Cards on the table: at Mortgage Soup we believe the next eight months are going to make 2025 one of the busiest years in recent memory.
TAILORED SOLUTIONS
The political and economic climate remains uncertain and we can Trump around as much as we want but the demand for tailored mortgage solutions is stronger than ever.
The industry is shifting towards a more solutions-driven approach where lenders and brokers alike must think beyond rates and focus on holistic client needs.
For those prepared to adapt and innovate, the rest of the year still offers immense potential.
Robyn Hall and Kevin Rose are founders of Opus First Media, publishers of Mortgage Soup
