It is important to be clear about what has changed in the mortgage market over the last month or so, because the latest data-specific headlines are not exaggerating for effect, they are reflecting a market that has moved quickly and in a very different direction to earlier in the year.
The Bank of England’s Financial Policy Committee now says around 5.2 million borrowers, or 58% of all mortgagors, could face higher mortgage payments by the end of 2028. That is not a marginal shift, it is the majority of the market.
At the same time, product choice – according to Moneyfacts – has tightened considerably, with the number of available deals falling from around 8,500 to roughly 7,000 in a matter of weeks, while average fixed rates have moved sharply upwards, with two-year fixes climbing from around 4.8% to close to 5.8% in a month.
When you layer on commentary around this being the biggest market upheaval since the ‘Mini Budget’ it becomes very difficult to argue that this is anything other than a reset in market conditions. Borrowers can see that, and they are reacting to it.
WHY THE FEAR FACTOR IS REAL
On a recent Paradigm Mortgage Services’ podcast with Richard Howes and Santander’s David Morris, I spoke about what I had been seeing directly from clients, and how the shift in sentiment has been clear.
Borrowers are getting in touch with some perturbed about the future, others downright fearful, even those whose current deals are not due to end until much later in the year, because they are worried about where pricing might go next and whether waiting could leave them in a worse position.
For most households, the mortgage is the single largest monthly outgoing, and while energy bills and fuel costs remain important, they do not tend to carry the same weight in terms of their direct impact on disposable income.
There was a valid question raised during the podcast discussion about when mortgage rates became the main signal for the wider cost of living, and while that might be debated, the reality is that a growing proportion of income is now committed to housing costs.
That means even relatively small rate movements can translate into meaningful changes in monthly payments, which is why borrowers are focused on this even if they are currently on a fixed rate and do not need to act immediately.
A MARKET THAT FEELS HARDER TO MANAGE
The challenge is not just that rates have moved, but how quickly and unevenly this has happened. We have seen rates increased in short periods, lenders withdrawing or repricing products at pace, and a reduction in overall choice.
That combination creates a market which feels unstable and difficult to read, particularly for borrowers trying to make decisions based on daily headlines.
It also highlights the gap between perception and reality, because while the market has clearly shifted, outcomes are not the same for every borrower and there are still options available depending on individual circumstances.h5
THE ROLE OF ADVICE IN A CHANGED ENVIRONMENT
This is where advice becomes critical, not just in sourcing and securing products but in helping borrowers understand what the data actually means for them. Because while millions may face higher payments over time, those increases are expected to be more modest than previous shocks at an aggregate level, which is an important point often lost in the coverage. Without that context, borrowers are left to assume the worst.
At the same time, advisers are working within a market that is changing quickly, and that creates its own pressures when trying to deliver certainty and reassurance.
WHAT LENDERS CAN STILL CONTROL
While lenders cannot control global events or swap rate movements, there are still clear areas where they can make a difference.
Providing more notice on product withdrawals or pricing changes would help advisers manage cases more effectively and reduce the risk of clients missing out. Extending offer validity periods would give advisers/borrowers more confidence in committing to a deal in a fast-moving market.
There is also a strong case for consistency in pricing, particularly removing dual pricing between direct and intermediary channels or across brands within the same group, because from a borrower’s perspective this creates confusion and raises questions about fairness.
Under Consumer Duty, it is difficult to see how differing prices for the same mortgage, supports positive consumer outcomes.
A DIFFERENT MARKET, NOT AN UNWORKABLE ONE
There is little point in downplaying what is happening, because this is a different mortgage market to the one we were in earlier this year, and borrowers are right to recognise that. However, different does not mean unworkable.
What it does mean is that borrowers need clear guidance, advisers need the ability to act quickly, and lenders need to consider how their actions and processes affect real outcomes
Because while the headlines are focused on rising costs and shrinking choice, the way this market is handled will determine whether borrowers experience it as a crisis or simply a period of adjustment.
