Brokers must guide borrowers through complex lending landscape
Soaring pre-approval rates are a clear sign of growing confidence in the mortgage lending market, according to aggregator Connective.
Connective said that 27% of all applications from the aggregator’s brokers this February were for pre-approvals – the largest proportion in four years and a 50% increase from February 2023.
This is indicative of more borrowers entering the market in the short term and while it is uncertain if this will directly translate into higher settlements, “it does signal growing confidence in the lending market”.
Connective chief executive Glenn Lees said: “We know there’s a degree of seasonality at play with the data as February historically tends to be a peak month as people consider buying after a slower December and January.
“However, this February stands out as the highest proportion of pre-approvals we’ve seen in years, certainly since 2021 which was when the world opened up again post-COVID.”
While there is optimism to be gleaned from this pre-approval data, Lees urged brokers to keep a cautious eye on broader economic developments.
He said: “Our pre-approval data indicates that borrower’s appetite to jump into the property market is increasing and the recent rate cut is likely to fuel that further. But the reality is more nuanced; increased demand will inevitably increase property prices.
“Overlay the pressures of a cost-of-living crisis on household budgets and it could remain just as difficult for many home buyers to get pre-approval.”
Lees reiterated the important role brokers play in guiding borrowers through the application process.
“There is no guarantee that all the pre-approved applications will convert into settlements. But brokers have a great opportunity to add value to clients that is deeper than finding the best rate.
“The market might be warming up, confidence might be growing, but the lending landscape remains complex and brokers who understand their clients' financial goals and can help them navigate the landscape will be successful.”
