Majority of lenders surveyed predict worsening affordability despite lower rates
Mortgage affordability is expected to become a more acute challenge by 2027, according to a poll of senior industry figures conducted by Phoebus Software.
At the Future of Mortgage Servicing conference at the Belfry, hosted by Phoebus Software, Target Group and the Financial Services Forum and attended by C-suite mortgage professionals, delegates were asked if they think affordability will become a more pressing issue in the next couple of years.
Of those polled, 77% of lender representatives said they believed affordability would become a more pressing concern over the period. Almost half (47%) anticipated a deterioration in affordability, while a further 30% predicted it would become “significantly worse”.
A minority took a more stable or positive view. Around 17% of respondents said they expected no change in affordability, while 7% thought conditions would improve.
“Despite a resilient housing market and lower rates than 12 months ago, the tax increases announced in the Budget, along with higher unemployment, could affect mortgage affordability,” said Adam Oldfield (pictured right), chief executive of Phoebus Software. “So it’s understandable that industry leaders are predicting that it will become a more pressing issue.”
Pete O’Connor, chief executive of Target Group, linked lenders’ concerns to the wider fiscal and economic backdrop.
“The fact that three-quarters of leaders we polled in the mortgage industry expect affordability to worsen highlights the impact of the Chancellor’s use of fiscal drag to raise revenue – bringing 5.2 million people into paying income tax and moving another 4.8 million into the upper rate band, quite aside from the first fuel duty increase in 15 years,” O’Connor said. “All this is eroding disposable incomes.
“Growth expectations have been downgraded for every forthcoming year until the end of the decade and the tax burden is forecast to rise to an all-time high of 38.3% of GDP in 2030. So lenders are not being unreasonable.
“Let’s not forget the rate of UK unemployment rose to 5.1% in the three months to October as unemployment hits a post-pandemic high, showing another sign the jobs market has weakened.”
For mortgage brokers, the findings underline the need to continue stress testing, monitor customers’ financial resilience and consider how servicing and arrears strategies might need to adapt if affordability constraints deepen over the remainder of the decade.
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