The Intermediary – March 2026 - Flipbook - Page 26
RESIDENTIAL
Opinion
Just the calm
before the storm
T
he reaction to the
Spring Statement was
muted, because it was
such a non-event. To an
extent this is good. At
least we didn’t have any
major policy changes falling out of it
ahead of the next Autumn Budget. No
news was good news, to a degree.
But if you look a bit more closely,
there are some worrying signs on the
horizon. In Q1 2026, the economic
news has been prey good.
Retail spending growth more than
doubled in January as shoppers held
out for the sales. The S&P Purchasing
Manager Index for services and
manufacturing in January pointed to
the fastest expansion of activity since
August 2024.
Nationwide, Halifax and Rightmove
had all reported a rebound in house
prices at the start of the year. And
consumer confidence rose for the
second consecutive month in January,
according to GfK. This is just the latest
sign of improved momentum.
Added to that, Andrew Bailey had
suggested scope for further easing of
Bank Rate soon.
Look at the latest arrears and
possessions figures from UK Finance.
In Q4 2025, there were 80,490
homeowner mortgages in arrears
of 2.5% or more of the outstanding
balance, a 4% decrease compared
with the previous quarter. The overall
proportion of homeowner mortgages
in arrears stood at 0.92%, while 0.5%
of buy-to-let (BTL) mortgages were
in arrears. Buy-to-let arrears also
declined, falling 9% quarter-onquarter to 9,520 cases.
Possessions also fell in Q4. A total
of 1,210 homeowner mortgaged
properties were taken into possession,
13% fewer than in the previous
quarter. Buy-to-let possessions
dropped 14% to 770 properties.
I was beginning to feel confident.
But now the latest Office for Budget
Responsibility (OBR) forecasts
24
The Intermediary | March 2026
downgraded 2026 GDP growth
to 1.1%, from 1.4% in November.
They also showed unemployment
peaking at 5.3%.
Disrupting the market
The good news the Chancellor
mentioned in her statement was
faster-falling inflation – to 2.3% in
2026, hiing 2% target by late 2026.
That prospect has vanished
now that conflict has escalated in
Iran. The price of oil has already
risen significantly.
Although the UK does not import
much oil from Iran directly, it is a
key supplier to China and India. They
are now having to source supplies
elsewhere, which is disrupting
global energy markets. The same
thing happened aer the invasion of
Ukraine in 2022.
Not only is Iran one of the largest
producers of oil in the world, around
20% of global oil supply passes
through the Strait of Hormuz. That
will push up prices, too.
A spike in the price of oil and
energy prices will drive inflation up.
If inflationary pressures increase –
remember inflation peaked at above
10% following the invasion of Ukraine
– the Bank of England will have
to react.
Forget two cuts in 2026; the
Monetary Policy Commiee (MPC)
will need to raise the Bank Rate.
Threadneedle Street hiked rates from
0.1% to 5.25% aer the invasion of
Ukraine. More borrowers will seek
to remortgage to escape standard
variable rates.
But at the same time, borrowing
costs for banks and lenders will rise,
potentially echoing the financial
crisis – interbank lending froze then.
Either way, credit will tighten. And
that will mean less origination and
fewer approvals.
Lenders will put stricter mortgage
criteria in place – higher deposits,
reduced product availability.
JONATHAN HOLE
is chief risk officer
at Target Group
Mortgage arrears will start to
rise for those stuck on trackers and
standard variable rates (SVRs).
And that’s before we get to the 2026
remortgage boom.
Global threat
A higher bank rate isn’t the only
threat. Global supply chains will
be disturbed. Trade routes will be
disrupted. There will be economic
instability on a global scale. We’ve
already seen stock markets drop.
As GDP growth falls, wage growth
will slow, and job security will
drop. Inevitably, redundancies will
start to rise. But at the same time as
people need new jobs, there will be
fewer available – vacancies will fall.
Inevitably, mortgage arrears will start
to rise more widely.
At least we have the Mortgage
Charter in place now, so it is unlikely
that the situation will deteriorate to
the state we saw in 2008.
And how is the Chancellor reacting
to the threat? She is insisting her
economic plan is “the right one.”
In the face of war in the Middle East
and mounting global uncertainty, the
mortgage industry needs someone
with a plan. We don’t need someone
at a dispatch box reading out a
holding statement.
The mortgage industry needs to
prepare. Lenders should invest in
beer analytics to catch early warning
signals from changes in payment
paerns. They need to consider
investing in technology to manage
distressed loans more efficiently.
Acquisitive buyers seeking cheap
portfolios of non-performing loans
can prepare by building relationships
with specialist servicers now, so that
any transfers go smoothly, and the
market can accelerate recovery. ●
