Financial stability on the brink, according to Knowledge Bank's data

22 June 2023

The latest monthly criteria index from Knowledge Bank highlights the pressing financial difficulties for many in the UK, with inflation still above target at 8.7%, this is no surprise.

The nation finds itself in the midst of a much-discussed cost-of-living crisis, causing some people real hardship. Many are clearly turning to mortgage brokers for help, looking for solutions to help them either remortgage, get on the housing ladder, or even release equity to help them manage their debts.

Data from the ‘residential’ mortgage sector in May reveals an increase in searches related to delayed or missed payments There is also a persistent trend linked to the maximum age a borrower can be at the end of the mortgage term, further supporting the data which tells us the general population are getting onto the housing ladder later. Brokers have also seen clients look at extending their mortgage terms to make their monthly payments more affordable.

Notably, the search term 'self-employed – 1 year’s accounts' has reclaimed its position in the top five residential searches for the first time since December 2022.

Over the past three months, there has been a noticeable surge in the trend for 'joint borrower, sole proprietor' mortgages. This is usually parents or grandparents helping their children get a foothold on the property ladder. Earlier this year, over half of the Londoners who took part in a Zoopla survey admitted they were relying on their parents’ wealth to get them on the property ladder.

We find further evidence of the challenging market, when looking at Buy to Let search data. ‘No requirement to be a homeowner,’ shows some are looking at alternatives ways to purchase and get on the ladder.

For the first time since October 2022, the Knowledge Bank data highlights an increase in demand among ‘holiday-let’ searches. As has been reported over the last week, there has been a change in the demographic of those taking up staycations. Landlords are as ever, finding ways to maintain good affordability across portfolios. Add to this the impending planning permission rule changes, the market could see a rush in applications for holiday lets.

The searches in the 'second charge' sector in particular, reveal a notable increase in people looking for answers to their financial challenges. New search entries relate to customers looking for additional finance while having arrears or defaults. Additionally, there was a rise in searches for lenders who will accept people with a debt management plans. This, alongside the number one search for ‘maximum LTV’ indicates that clients are actively reaching out to brokers to help them manage their finances by securing them additional borrowing.

Knowledge Bank CEO, Nicola Firth, said: “As borrowers face the burden of increasing living expenses and often rising debts, many are crying out for help. Others are being hit especially hard if they are coming off a fixed rate mortgage at sub-2% and facing the prospect of moving on to one that could be three times higher.

“Despite this, it is clear that some are trying every means possible to get on the housing ladder, from taking a ‘joint borrower, sole proprietor’ mortgage, to extending payments over a longer term and even looking at buying a rental property before their own home.

“The current economic climate and outlook, again point to the importance and value of mortgage brokers to help both existing and potential borrowers. At the same time we can see just how challenging the market is for brokers, with the need to navigate complex requirements , ever changing rates , and complex criteria. Fortunately, that’s where Knowledge Bank is here to help with our technology playing a pivotal role in helping brokers and their customers. The new Consumer Duty Flags particularly will help brokers identify those who need more support during these challenging times. Also allowing lenders to identify any underserved areas.”

During the first quarter of 2023 there were over 280,000 searches on Knowledge Bank and over five million criteria searches have been carried out to date.

Criteria Activity Tracker

Top five searches performed by brokers on Knowledge Bank during May 2023

RESIDENTIAL BUY-TO-LET SECOND CHARGES EQUITY RELEASE
1 Maximum Age at End of Term Lending to Limited Companies Maximum LTV / Loan To Value Minimum Property Value
2 Missed or Late Payments First Time Landlord Lend in Scotland Ex-Local Authority Houses
3 Joint Borrower Sole Proprietor No Requirement to be a Homeowner Mortgage or Secured Loan Arrears or Defaults Maximum LTV / Loan To Value
4 Self Employed - 1 Years Accounts Minimum Income - Interest Only / Part and Part Single Applicant Debt Management Plan - Ongoing / Current Maximum Age at Application
5 Employment - Time in Current Employment Holiday Lets Minimum Loan Amount Individual Voluntary Arrangement - Ongoing / Current

SELF-BUILD BRIDGING COMMERCIAL
1 Maximum LTV / Loan To Value Minimum Loan Amount Minimum Loan Amount
2 Custom Build - Maximum Loan To Cost Regulated Bridging Semi-Commercial Properties
3 Custom Build - Maximum Borrowing / Loan Amount Maximum LTV / Loan To Value Maximum LTV / Loan To Value
4 Minimum Loan Amount Second Charge Loan Mixed Use Properties / Part Commercial
5 New Build Warranties Commercial Property Excluded Commercial Sectors

Brokers wanting to find out more about Knowledge Bank can visit: www.knowledgebank.uk