The latest Mortgage Market Tracker report from the Intermediary Mortgage Lenders Association (IMLA) reveals surprisingly upbeat market sentiment among advisers during Q2, although the data indicate growing caution about the outlook for the sector. Overall, 75% of advisers described themselves as ‘confident’ about the mortgage market for the quarter, but the proportion of those who were ‘very confident’ fell from 26% in April to 20% in June, while the ‘fairly confidents’ fell from 56% to 40% over the period.
IMLA’s research shows that intermediaries are maintaining healthy business volumes, with the average adviser placing 93 cases over the previous 12 months. The figure is slightly lower than Q2 2022 (97 cases) and Q2 2021 (95 cases), but significantly higher than any quarter in the four years preceding 2021, three of which predated the pandemic.
Despite negative headlines about the buy-to-let sector, the data suggest this sector remains buoyant, accounting for 25% of mortgage cases placed in Q2 2023, a fairly small reduction from the 28% recorded in Q2 2022.
The average number of Decisions in Principle (DIPs) that intermediaries processed stabilised in Q2, having fallen for the five preceding quarters. On average, intermediaries dealt with 25 DIPs in Q2, up 2 on Q1 2023 and the first quarterly increase since Q1 2022.
In Q2 2023, conversions from DIP to completion improved slightly at 36%, up from 34% in the previous quarter, albeit significantly lower than Q2 2022, when the figure was 44%. The overall conversion rate was broadly similar across all market segments.
The conversion rate from full application to completion also increased slightly to 59%, up from 57% in the preceding quarter. June was the best month on this score, with the conversion rate reaching 63%, the highest percentage since July 2022. Conversion rates for home movers1 were up significantly at 59%, a 7% increase on the previous quarter, while the figure for first-time buyers2 remained consistent at 61%.
Kate Davies, Executive Director of IMLA, comments:
“The latest findings demonstrate the remarkable resilience of the UK mortgage market and intermediaries themselves in the face of continued market volatility. Confidence levels, while remaining generally robust, inevitably dipped in June as the expectation of interest rates remaining higher for longer became apparent. But with business levels maintaining healthy levels and conversion rates increasing, the outlook for the intermediary market appears positive.
“The results for this quarter are particularly encouraging in that they show positive activity across all market segments, including sustained levels of first-time buyer cases and growth in the home-moving sector, rather than a reliance on remortgaging.
“As the economic environment looks set to remain challenging, the demand for professional mortgage advice will continue to grow, and IMLA’s prediction that intermediaries could account for 90% of mortgage distribution by 2024, as reported in our ‘New Normal’ report earlier this year, continues to stand.”
1 As reported by home movers-focused brokers, defined as “At least 4 out of every 10 residential mortgages placed are for movers”
2 As reported by first-time buyer-focused brokers, defined as “At least 4 out of every 10 residential mortgages placed are for first-time buyers”
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Notes to Editors
The IMLA Mortgage Market Tracker uses data from BVA BDRC’s Project Mercury. Findings for Q2, 2023 are based on around 301 interviews with mortgage intermediaries, collected across April, May and June.
The Intermediary Mortgage Lenders Association (IMLA) is the trade association that represents mortgage lenders who lend to UK consumers and businesses via the broker channel. Its membership of 54 banks, building societies and specialist lenders include 18 of the 20 largest UK mortgage lenders (measured by gross lending) and account for about 90% of mortgage lending (91.6% of balances and 92.8% of gross lending).