Meeting the diverse needs of the modern mortgage market

Affordability is a word often associated with the residential market, especially when it comes to first-time buyers and their ability to get onto the property ladder. However, affordability also applies to the rental market, and this is a factor which inevitably leads us back to FTBs and their ability to accrue a deposit to match any homeownership aspirations. A vicious circle you might say.

In certain areas, rent burdens can be crippling and this is becoming even harder with living costs rising at their fastest pace for 30 years. Against this economic backdrop, new research from SpareRoom highlighted that many UK tenants are set to feel the pinch even more, with 29% already spending over half of their monthly pay on rent.

People spending more than 30% of their household income on rent are traditionally considered ‘rent burdened’, those who spend over 50% are considered ‘severely rent burdened’. The data shows that the majority of renters are currently ‘rent burdened’. With increased energy bills and national insurance costs looming, women are most likely to feel the pinch, with over 85% spending 30% or more of their income on rent, compared to 75% of men, highlighting the affordability gap between men and women.

Unsurprisingly, the research added that people in London, South East and South West England are spending more of their take-home pay on rent than in other regions. 84% of Londoners, 83% of South East and 82% of South West are suggested to spend over 30% of their salary on rent. The pandemic saw rents drop in London and increase everywhere else, but rents in the capital are suggested to be back on the rise, which will no doubt cause further affordability issues in the coming months.

On the back of such data, there are a few potential trains of thought to take. The obvious one is that the private rental market remains a vital option for a huge, and growing, number of people across the UK. From a BTL perspective, sustained demand will continue to generate opportunities for landlords, investors and developers as rates remain highly competitive alongside some favourable criteria and flexible fee options.

From a residential standpoint, we are seeing increased activity at the higher LTV bands and extensions to responsible lending boundaries when it comes to income multiples. For the growing number of homebuyers who fall beyond some still highly restrictive mainstream lending criteria, specialist lending propositions have really stepped up to offer responsible, affordable, innovative and flexible product ranges for a wider variety of borrowers who are credit worthy – despite the odd historic setback – and have sufficient income or income history if self-employed.

It’s sometimes important to take a step back for a moment and realise the breadth and variety of solutions available across the mortgage market to support a range of borrowers whether they are FTBs, in later life, are self-employed or have unusual or multiple incomes. This is also the case for landlords, developers, self-builders, home improvers, business owners, I could go on and on.

The intermediary market will continue to play a crucial role within this journey and, in turn, this places an increased emphasis on the role of distribution partners to ensure that they are staying ahead of the curve to deliver the solutions and support to meet the diverse demands of the modern mortgage market.

Steve Swyny, Commercial Director at F4B Network