Andrew Lloyd
Chief customer officer, PEXA

Over 1.5 million people are expected to see their fixed-term mortgages expire before the end of the year.

For them, the good news is that product rates have fallen since their peak of nearly 6%, so we are moving in the right direction especially with inflation now at 2%, signalling at least some form of economic recovery.

The disappointing news is that, despite this, the Bank of England maintained the base rate at 5.25% in June, perhaps because it was waiting to see what the fallout of the general election might be on markets. As such, borrowers are understandably waiting to see if the anticipated reduction comes in August before they take action to remortgage.

Any new government must commit to encouraging investment in the conveyancing system

The same is true of first-time buyers, with many waiting to see if they can secure a mortgage at a lower rate before pressing ahead.

Put simply, everyone is playing a waiting game until the first cut comes that will encourage lenders to price cheaper deals. For borrowers, it makes sense. Some would even rather drop onto their lender’s SVR than remortgage right now.

However, this waiting game is also creating a level of pent-up demand — the number of remortgage cases in the pipeline is growing and we expect a flurry of activity as existing borrowers and first-time buyers race to transact when rates fall.

Election promises

Exacerbating this ever further, the housing market has also become a key battleground in the general election. Each party has healthy ambitions to ease the current housing crisis, with both the Conservative and Labour parties promising 1.6 million and 1.5 million new homes respectively to address affordability issues that are stifling transactional activity.

It is commendable that they are trying to fix a sluggish market for the good of the economy.

Borrowers are understandably waiting to see if the anticipated reduction comes in August before they take action to remortgage

The problem is that these policies only stimulate further demand in the front end of the process without doing anything to address the infrastructure that supports it.

As such, the anticipated number of those waiting in the wings has the propensity to overwhelm the current conveyancing infrastructure. The UK’s system, rooted in the Law of Property Act 1925, is fragmented and reliant on numerous practitioners performing manual processes. It means lenders and conveyancers alike are confronted by capacity issues that hold them back from delivering the service they seek to provide.

This issue is fundamentally avoidable, though, as long as we don’t sit idly by and wait for it to become a reality. The role of the private sector investing in technology and digital transformation will be pivotal.

Such modernisation will reduce the burden on human resources and ensure that borrowers receive timely and efficient service.

This waiting game is also creating a level of pent-up demand

APIs, for example, can help lenders and conveyancers automate updates to a case, with data flowing directly between lender or law firm systems and third-party platforms such as PEXA to facilitate efficient transactions, reduce fraud and operational overheads, and save considerable time.

Collaboration

Collaboration between lenders, technology providers and regulatory bodies is essential to ensure that the solutions developed are robust, secure and ultimately beneficial for all those within the mortgage process. But to do this on a national scale for long-term change necessitates support at a governmental level too.

Modernisation will reduce the burden on human resources and ensure that borrowers receive timely and efficient service

Any new government must commit to encouraging investment in the conveyancing system because bringing about modernisation is the only way to realise the transformative potential that technology holds for the property market.

We must change and invest in modernisation now to avoid the inevitability of infrastructure that is completely unable to cope with peaks in demand later in the year. While borrowers are playing the waiting game, market stakeholders certainly cannot afford to do the same.

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