Mortgage lending in the UK is breaking records – and here is what to expect in 2022 for the mortgage market.
According to property market insights, mortgage lending in the UK reached £285bn in 2021, a 14-year high. The figures are interesting because mortgage lending values in 2021 are higher than in 2020 and 2019. Over the first five months, mortgage lending in 2021 was 87% above the levels in 2020 and 51% above the numbers in 2019.
Given the boosted market and the rising number of first-time property buyers getting onto the property ladder, mortgage lending in the UK might transform in the upcoming year. So which mortgage trends to expect in 2022?
Trend 1 – Rising Remortgage And Second Charge Mortgage Numbers
With inflation rates more than 3% above the target levels of the Bank of England, current interest rates are at record-low levels. Property specialists expect a slight increase in the rates in 2022 and say current mortgage pricing is at low levels. As people try to save money on remortgages, we might see this trend continue in 2022.
Other experts likewise highlight the importance of second charge mortgages due to the pandemic-led increased living costs. A second charge mortgage is a secured loan made for homeowners and is different from applying for a new mortgage. It uses the share of the owned property as collateral to borrow extra funds. Mortgages, in turn, are popular among first-timers. For example, new buyers get off-plan property in London or purchase ready to move new homes.
Given the high inflation rates and rising property prices in the UK, second charge mortgages might address the borrowing demand from homeowners.
Trend 2 – Trending Green Mortgages
Housing in the UK accounts for more than 20% of the total CO2 emission. Green mortgages offer more favourable conditions than typically for buyers and homeowners of energy-efficient homes. However, this type of mortgage remains unpopular: only 6% of brokers sold at least one.
The benefits of green mortgages include lower interest rates or cashback. Several lenders offer extra funds at lower rates to the existing customers to support green renovations, such as loft insulation or solar panels.
With the government striving to support this market in line with the net-zero strategy, green mortgages might become trendy in 2022. Plans for linking the mortgages with green renovations and new targets for banks and building societies might become the primary driver for this trend. Some of the entities already offer green mortgages, so expect more to implement this practice and see rising numbers of green mortgage schemes in the following year.
Trend 3 – PropTech Solutions Enter the Mortgage Industry
Over the past few years, Property technology, or PropTech, has firmly entered the real estate sector. The mortgage market is not different – more modern solutions and digitization, offering increased efficiency and better management, might enter the lending industry in 2022.
Industry experts say digitization of mortgage chains is required for the market to better suit younger generations, such as millennials. Those businesses that implemented digitization benefitted from the investments during the pandemic, while companies that relied on paperwork struggled to stay afloat.
As a result, specialists expect more businesses to implement digitization across the mortgage industry. Such improvements as digital mortgage processes, virtual home tours, and digital assistants are among the most trendy PropTech solutions.