It has been a volatile year for fintech and financial services. With significant elections in the UK and the US, shifting inflation rates, base rate cuts, evolving regulations and growing consumer scepticism, it has been both turbulent and unpredictable.
We can expect that 2025 will bring more of the same, and therefore it is important that the challenges faced this year act as a springboard for change, enabling the sector to grow and support a new era of buyers, whatever the weather.
So, what can we learn from 2024 and plan for as we head into the New Year?
Reflecting on the past year
One of the main takeaways from 2024 has been about being flexible enough to handle a constantly evolving and fast-moving market. There is no better example than the recent surge in swap rates that were witnessed following the UK Autumn Budget.
All lenders, if they want to stay in the game, need to ensure they can handle all types of volatility, market-led or regulatory and funding-driven. However, recent research across several mortgage applicants has shown this is far from the case, and buyers are suffering.
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This year, almost one in five (17%) Brits said they wish they had chosen to rent for longer instead of applying for a mortgage due to the stress and inefficiency associated with the mortgage process, and, even more shockingly, of those who had applied for a mortgage, revealed the feeling that they most associate with the process is anxiety.
In the age where just about everything can be done at the click of a button from your phone, there is a level of expectation from consumers that is sadly not being met. This is not only making for a stressful buyer experience, it is a problem for brokers and lenders, who are left with costly maintenance bills for a system that offers a substandard service.
So, what does this mean for 2025?
Next year, demand for mortgages in the UK looks set to continue to rise.
The Labour government has housebuilding at the forefront of its agenda, with plans to build one-and-a-half million new homes over the next five years.
While this ambitious target has been met with some scepticism, it will have undoubtedly caught the attention of some previously dejected first-time buyers, who may now feel that their dream of becoming a homeowner might just be back on the cards.
So, if ever there was a time for lenders to get their ducks in a row, it is now. The Bank of England cut interest rates from 5% to 4.75% in November, the second reduction of 2024, and while it is expected to proceed with more caution in 2025, there is still optimism that interest rates will continue to stabilise.
Final thoughts
As the demographic of mortgage applicants also begins to change, we will start to see a new era of buyers coming through who are likely to require more niche packages than those that have gone before – and this will become the norm.
Gen Z increasingly has multiple sources of income from freelancing and side hustles, which means that mortgage providers will need to adopt new strategies and a more flexible approach to be able to support these consumers or lose out to competitors who can.
