LONDON (ShareCast) - (Sharecast News) - Mortgage Advice Bureau said in an update on Friday that written business in October and November was around 50% lower than expected, amid the fallout of the short-lived Liz Truss premiership and its disastrous mini-budget.
The AIM-traded firm had reported a large gain in market share in a strong set of interim results for the six months through June, but said that after ex-chancellor Kwasi Kwarteng's unfunded and unexpected tax cuts announced on 23 September created a "significantly heightened" level of uncertainty, the mortgage market was directly, negatively impacted.

That included an immediate rise in mortgage interest rates, the withdrawal of many products by lenders, a rapid tightening in underwriting, and reducing availability of credit.

As a result, house purchase activity was significantly reduced, and re-financing was also impacted.

MAB said the situation persisted as borrowers and lenders awaited some level of reassurance and clarity from the autumn statement, delivered in mid-November by current chancellor Jeremy Hunt under prime minister Rishi Sunak.

"These extreme market and lending conditions severely impacted activity levels across all of the group's product lines, with written business in October and November circa 50% below expected levels," the company said in its statement.

"The reduction in mortgage activity and new house sales is expected to persist until early 2023, after which activity levels are expected to start to slowly build."

Adviser recruitment in the fourth quarter was also affected, with the majority of the company's AR firms choosing not to onboard new advisers as planned, having paused growth plans until the outlook became clearer.

The number of underperforming leavers had continued at a normal level, and in most cases the advisers would not be replaced until mortgage volumes picked up "significantly" from the current, "exceptionally low" levels.

"In recent weeks we have seen early signs of our highly congested pipelines of written new business completing, due to lower new business levels, and we expect this trend to continue.

"Buyers with mortgages reserved prior to the mini budget are strongly motivated to complete their purchase at the lower mortgage rates they have secured.

"Where mortgage offers expire, typically after six months, there is a risk of some transactions aborting if they are not renegotiated."

Pipelines were still holding together reasonably well, MAB said, but the board did now expect "slightly higher" fallout rates than usual.

Additionally, the directors said they were "disappointed" that Boomin was recently put into liquidation, having not been able to secure new investors in a "challenging" economic climate, leading to a £2.8m non-cash write-off for its investment.

Looking ahead, MAB said its result for the year ending 31 December would be impacted by the adverse market conditions, with its own expectations for adjusted profit before tax now slightly below market forecasts.

It had, however, continued to grow its market share to 7% for the nine months ended 30 September, from 6.1% at the same time last year

The company said it expected adjusted profit before tax for the 2023 year to be "considerably impacted", as well as second-half weighted, and could be no higher than 2022.

"This reduced expectation for 2023 is directly due to the extreme market conditions following the September mini-budget, which have also led to a reduction in expected adviser numbers at the year-end.

"Lower housing market activity than originally anticipated, combined with potentially flat overall adviser numbers - with a fall in existing adviser numbers expected in the first half of 2023 - and tighter levels of underwriting criteria introduced by lenders, will also be contributing factors."

Despite the more challenging housing and mortgage market outlook for 2023, MAB said its long-term fundamentals remained "very strong".

Fluent's successful integration into the group positioned it to service increased lead numbers from new sources that would be onboarded throughout 2023, the board said.

The company would take a "rigorous and proactive" approach to the management of costs, while progressing with the planned investment in its proposition and resulting market share growth to ensure the "strongest possible recovery" in 2024 and beyond.

MAB added that it remained highly cash-generative, and retained a "strong" balance sheet to take advantage where there were opportunities for the outlook for 2023 to improve.

"The consequences of the so-called mini-budget have been quick and far-reaching," said chief executive officer Peter Brodnicki.

"Overnight our market moved from being fairly stable and reasonably confident, to almost the polar opposite.

"The sudden and unexpected pace of mortgage rate increases, combined with the tightening of mortgage lending criteria, have resulted in some customers pausing both home-moving and re-financing plans."

Brodnicki said the recent autumn statement and the various government changes prior to that had helped to stabilise markets.

"Although macro uncertainty remains for many reasons, we expect mortgage rates to continue to stabilise, allowing some customers to re-enter the home-moving market and also re-finance at more competitive mortgage rates than those seen in recent months.

"Despite the various market and political challenges, MAB remains very well positioned to grow its market share strongly through 2023.

"In more challenging housing markets, although we may see a reduction in organic advisers, our new AR recruitment performs strongly, so next year overall adviser numbers could remain flat."

At 0847 GMT, shares in Mortgage Advice Bureau Holdings were down 23.49% at 430p.

Reporting by Josh White for Sharecast.com.

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