Laura Sneddon's 2024 in review

The cost-of-living crisis is far from over

Inflation has fallen back to Bank of England targets, and interest rates appear to have peaked, but it is clear finances remain stretched for many borrowers, continuing to impact affordability in the mortgage market.

2024 has been a year when many homeowners moved off ultra-low fixed-rate deals and faced significantly higher mortgage costs. Many may have delayed opting for longer-term fixes, hoping rates would edge down again. However, as we’ve seen, particularly in the latter months of the year, a downward movement in base rates does not automatically lead to lower swap rates across the market.

Building societies, in particular, have been working to offer innovative solutions for borrowers grappling with ongoing affordability challenges. Individual underwriting, flexible product solutions and collaboration with brokers to understand individual cases have enabled many to refinance or move home when they might otherwise have been blocked by standard affordability calculations. This approach is reflected in Building Societies Association (BSA) figures, which show that, for the six months to March 2024, mortgage balances increased across the building society sector, while balances at other lenders fell.

Green mortgage lending back on the agenda

Reforming planning in the UK to build more homes was one of the key pledges of the incoming Labour Government. It has also reiterated its commitment to net-zero targets, with a focus on improving energy efficiency in homes to reduce carbon emissions and lower household bills.

The previous government dropped plans to ensure all commercially let property had at least an EPC rating of C, but this is likely to return to the policy agenda soon. There is expected to be renewed pressure on lenders, particularly those signed up to the Net Zero Banking Alliance, to report on the carbon emissions from their mortgage portfolios.

This year, retrofit products have returned to the market, helping homeowners finance ‘green’ home improvements to boost their EPC ratings. Alongside this, green mortgage products targeting buyers of new-build properties with the highest EPC ratings have continued to gain traction.

Smarter technology – but with a human touch

One of the biggest themes of 2024 has been the rise of digital technology and AI. These innovations are also starting to transform the mortgage market — and over the past year we have seen technology improve operational efficiency, speed up application processes and open new communication channels for brokers and customers.

However, digital transformation must be complemented by a focus on customer service and broker satisfaction. In the building society sector, individual underwriting has proven highly effective for cases that fall outside mainstream lending criteria. Meanwhile, traditional face-to-face and telephone services remain crucial for delivering high standards of service, especially for older and less tech-savvy customers. These services also play a vital role in protecting customers from financial scams.

Increased support for buy-to-let

It has been a tough year for the buy-to-let sector. Figures from T UK Finance show that there were just over 41,000 new BTL loans advanced in the first quarter of 2024 - down 16.76% on the same period the year before. 

But despite this market contraction, building societies in general, and Hinckley & Rugby in particularly, have shown they remain committed to the buy-to-let market, recognising its importance in the housing sector. Lenders in the building society sector have increasingly take a pragmatic approach to ICR stress tests and affordability in order to support his key market. One important innovation has been the rise of top-slicing on BTL products, which has seen many lenders take a landlord's private income into acing to help meet interest cover ratios, which have risen due to the higher interest rate environment.

Renewed focus on younger and older borrowers

Affordability remains a challenge for many, particularly first-time buyers and older borrowers (55+), who often face restrictions due to maximum borrowing ages. Building societies have been particularly innovative in addressing the needs of these groups.

• For first-time buyers, Joint Borrower Sole Proprietor mortgages have gained popularity, allowing the so-called ‘Bank of Mum and Dad’ to help the next generation onto the housing ladder.
• For older borrowers, building societies have removed maximum age limits on mortgages, helping those in their 50s and 60s refinance properties. This approach provides a valuable alternative to retirement interest-only (RIO) and equity release mortgages, offering more choice to older borrowers and a solution for ‘mortgage prisoners’ trapped on higher standard variable rates (SVRs).

Focus on niche markets

Building societies continue to stand out by tailoring products to niche mortgage markets. For instance, Hinckley & Rugby Building Society has developed solutions for the self-build market and pioneered lending products for individuals coming to the UK on working visas.

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