Mortgage Advice Bureau (MAB), a leading mortgage brokerage, is navigating a challenging market environment marked by subdued housing transaction activity and rising borrowing costs. The company recently downgraded its full-year profit forecast to £38 million amid cautious consumer behaviour and broader economic uncertainties.

Since 2022, the cost of mortgages has increased sharply following successive rate hikes by the Bank of England aimed at curbing inflation. Although the base rate has eased somewhat, expectations for future cuts have diminished, with some market participants anticipating further rises due to ongoing inflationary pressures, compounded by the protracted conflict in Ukraine. This has led to rising swap rates, which lenders use to price fixed-rate mortgage products.

Housing market activity has slowed considerably: mortgage approvals in July were down 15% compared with the same period last year, while domestic purchase transactions decreased by 3% in the first seven months of 2024. This decline reflects hesitancy among first-time buyers and other purchasers, who are postponing home purchases amid higher financing costs and economic uncertainty.

Despite the downturn in purchase activity, MAB is benefiting from a strong refinancing market. Many borrowers locked into ultra-low fixed-rate deals in previous years are now facing significantly higher monthly payments as those deals expire. This has generated increased demand for mortgage product transfers, as customers seek more affordable options.

MAB has responded by expanding its network of advisers, increasing staff numbers by 9% during the year. The company has maintained stable revenue per adviser and preserved its market share in new lending while growing its presence in the refinancing segment. The firm anticipates a further rise in the volume of fixed-rate mortgages reaching their term in 2027, which could support future growth as the housing market recovers.

Shares in MAB have fallen more than 40% year-to-date amid the broad cooling of the housing market and dashed hopes of imminent interest rate cuts. Currently, the stock trades at approximately seven times forward consensus earnings, with a projected dividend yield nearing 7% for the full year 2027. While the group does not foresee a significant near-term recovery in purchase volumes, it views the current market conditions as a longer-term opportunity.