Mental health and the mortgage market

We need to focus more on mental health. Work-related stress and anxiety are problems that stretch across sectors, but they have proven particularly problematic in the property market.

Over the past year, the average number of days people took off sick jumped from 5.8 pre-pandemic, to 7.8, according to The Chartered Institute of Personnel and Development (CIPD). While minor illnesses, injuries, and acute medical conditions contributed to this, around 76% of respondents cited some stress-related absence. Chiefly, they alluded to heavy workloads and management styles as the main causes.

This issue proved especially pertinent among mortgage brokers in late 2022 as the market fell into freefall after Liz Truss’ mini-Budget. Brokers struggled to keep up with nervous lenders who were pulling products from the shelves with little-to-no notice.

Broker burnout was widespread, as advisers battled against email anxiety, exceptional stress, and 18-hour days. Even now, borrowers themselves are struggling with the toll that the current market is taking.

As part of our ongoing independent research, MFS surveyed a representative sample of 2,000 UK adults for Q3 2023. The respondents were split between those who had applied for a mortgage in the last year – either as a homeowner, investor, or who were remortgaging – and those who hadn’t applied for a mortgage.

Of those who had applied, 64% said they had struggled with stress or anxiety because of the challenges of securing a mortgage product. Meanwhile, 64% were searching online at least once a week to uncover the best deals available, and 25% had lost money on agent fees and legal costs as a result of a property purchase falling through.

No rest for the wicked

Despite these setbacks, borrowers do not appear deterred. Just over half (52%) of borrowers are looking to purchase a property once house prices fall. This rises to 64% for property investors specifically. But, while 69% of our respondents said mortgage brokers are essential for navigating the current landscape, it’s unlikely they’ll solely turn to mainstream lenders for their funding.

The majority (74%) shared that they thought there is a lack of certainty and assurance being provided by lenders. Also, 69% thought there is a lack of flexibility.

Fortunately, busy brokers may not need to worry about where, or how, they’ll find funding over the coming months. Borrowers have presented a solution themselves.

Some 56% of all borrowers, and 68% of property investors specifically, are now more likely to look for alternative lenders to help them finance a property. With this in mind, brokers would do well to remember those specialist lenders who didn’t withdraw their products when things got difficult.

Brokers should also prepare now to avoid any stress later. Borrowers are waiting for prices to drop, and it seems their wishes are being granted. The average cost of a property dropped by 4.7% in the year to September, according to Halifax’s latest House Price Index. This was the biggest fall seen since 2009.

Also, the wider economy suggests we’re on our way to recovery. Inflation is finally slowing down, base rate hikes have been paused, and revised figures show UK GDP is outpacing that of France’s and Germany’s.

We’re operating in a stronger economy, with reduced property prices. Investors could be incentivised to act, and quickly. Could a wave of buying activity be looming?

Is the mainstream lending market ready?

As it stands, it’s unclear if high street lenders will be ready for an uptick in applications. Yes, mainstream mortgage availability has improved in recent months. The number of mortgage options available for borrowers recently rose to its highest level since February 2022, according to Moneyfacts.

But, we’ve seen what happens when the mainstream market is caught off-guard. In the lead up to September 2022, there were well over 8,000 mortgage products available in the UK. After the mini-Budget, this plummeted to less than 4,000 within mere weeks. And for the deals that remained, criteria was tightened.

Looking ahead, there’s also plenty of uncertainty that could make some lenders nervous. Michael Gove confirmed the Renters Reform Bill will have its Second Reading in the Autumn, after many speculated it would be postponed. Jeremy Hunt will be delivering the next statement in November. The next general election could be as early as Spring 2024, and it’s very possible that we’ll have a new government in place, with entirely new policies.

Stressful times could be on the horizon. But this doesn’t mean brokers and borrowers have to accept anxiety as an inevitability. Specialist lenders will be there for investors in need of flexible solutions, for an inflexible market.