The latest Intermediary Lending Outlook research from the Intermediary Mortgage Lenders Association (IMLA) has found that renewed optimism in the mortgage industry for growth in 2015 is being overshadowed by the view that the market has become ‘too conservative’ as a result of post-financial crisis regulation.
74% of brokers take this view, which is backed by 65% of lenders. It comes despite improving sentiment towards market conditions following a period of changes to lending criteria.
IMLA’s previous research in July 2014 found 45% of brokers and 33% of lenders reporting that market conditions were worsening. This followed the implementation of the Mortgage Market Review (MMR) in April and with new macro-prudential controls on the horizon.
Their pessimism has since softened with just 23% of brokers and 21% of lenders feeling the same way in January 2015. Over half of brokers (51%, up from 41% in July) and lenders (53%, up from 44% in July) now feel market conditions are currently improving.
| Do you think mortgage market conditions currently… | ||
| Brokers | Lenders | |
| Improving | 51% (41%) | 53% (44%) |
| Stable | 26% (14%) | 26% (22%) |
| Worsening | 23% (45%) | 21% (33%) |
(July 2014 results in brackets)
However, IMLA’s research reveals 84% of brokers were unable to source a mortgage for at least one client during the last six months, up from 78% who said the same in July 2014. The biggest difficulties have occurred in four main product areas:
- 53% of brokers were unable to help a client with adverse credit
- 53% were unable to help an interest-only borrower
- 50% were unable to help a customer seeking to borrow into retirement
- 46% were unable to help a client who was self-employed or had an irregular income
Overall, brokers and lenders both identify low income borrowers and those with dependents as the two consumer groups who have been most impacted by reduced access to finance following the MMR.
Among the new rules, interest rate stress tests are seen to have had the biggest effect in reducing the amount people can borrow. More brokers and lenders report that the new rules are having an impact than was the case in July.
| Have the following had a direct impact on the amount people can borrow under MMR? (figures are for those responding ‘yes’) | ||
| Brokers | Lenders | |
| Interest rate stress tests | 81% (79%) | 88% (54%) |
| More detailed income/expenditure assessments | 71% (68%) | 67% (45%) |
| Extra evidencing requirements | 56% (42%) | 39% (9%) |
(July 2014 results in brackets)
39% feel product availability has increased following the MMR, while just 18% feel it has reduced. Yet opinion is more evenly split on product flexibility: 27% of brokers feel this has improved but 23% disagree.
“Regulation is vital to ensure that mortgage lending is safe and in proportion to consumer needs and the wider economy,” said Peter Williams, executive director of IMLA.
“But when families with dependents are among those who find themselves at a disadvantage, there are legitimate concerns that the pendulum has swung too far as a result of successive, incremental measures.
“The market is clearly still adjusting to changes including the MMR and the Financial Policy Committee’s interventions. With the European Mortgage Credit Directive (MCD) on the horizon and the latest Basel Committee proposals, it will become even more of a challenge to understand the individual impacts of these different interventions. What’s clear is that each new layer of control squeezes more people out at the margins. As the boundaries grow tighter, we must work to avoid unintended social engineering as a result.
“Current trends suggest that owner-occupation may fall below 62% by the end of the next parliament, and there is a real need for government, regulators and industry to pause and assess the lie of the land. Efforts must focus on striking the right balance between innovation and protection to avoid frustrating people’s legitimate ambitions to own their own homes.”
