Mortgage transactions will drop -6% as interest rate hikes curb borrowing

Mortgage activity is expected to fall -6% in 2022 as the market feels the brunt of interest rate hikes.

Rising interest rates make borrowing more expensive.

To understand what impact this is likely to have on the mortgage market, Henry Dannell analyzed mortgage data from the last decade as well as the first six months of this year.

This research reveals that mortgage market activity peaked in 2021, when the market was the most active in a decade.

This spike was largely driven by monetary financial institutions (MFIs) which are basically traditional lenders such as banks and building societies.

MFIs processed 1.486 million mortgage transactions in 2021, representing 89% of the total mortgage market. This is an annual increase of 17%.

Alongside MFIs, specialist lenders, companies that focus specifically on providing alternative mortgage lending solutions to borrowers who are unable to meet the lending criteria set by normal mortgage lenders, have also seen interest. significant for mortgage activity, up 19% since 2020 to process 151,000 transactions.

However, this represents only 9% of total mortgage activity that year.

Despite this small market share, 2021 still marks a high point for specialty lenders as they processed the highest number of annual mortgage transactions on record, likely due to the economic impact of the pandemic forcing borrowers to search for new ways to get loans.

Despite this 2021 boom, rising interest rates are expected to dampen the mortgage market in 2022, with an expected -6% decline in MFI activity and a -16.5% decline in specialty lending.

Henry Dannell manager Geoff Garrett commented:

“The boom in mortgage activity of 2021 marked a high point for the market.

Pandemic government intervention in the housing market, such as the suspension of stamp duties, has led to increased demand from buyers which has allowed lenders to provide more mortgages than ever before.

But, as we enter the second half of 2022, faced with a cost of living crisis and aggressive interest rate hikes, we can expect a significant drop in activity, both for MFIs than for specialized lenders.

However, people often turn to specialist lenders during tough economic times because they are more willing to take a chance.

As we move further into this current cost of living crisis with families struggling to pay bills and meet loan repayments, we may well see better performance when it comes to the level of mortgages. from specialized lenders.

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