So, here we are. 2019. A new year stretches before us and ordinarily we would look upon it with optimism and a renewed sense of vigour in terms of what might be achievable over the next 12 months.
These, however, are not ‘ordinary’ times and I think most housing and mortgage market stakeholders could be forgiven for feeling a sense of nervousness about what might be coming over the horizon.
That’s not to say that this year won’t be a good one for mortgage activity – recently leaked figures from UK Finance suggest it believes gross lending will rise to £278bn in 2019, with homeowner and buy-to-let remortgages continuing to rise, with the former providing – along with product transfers – the bedrock of the market for some time.
However, the lender trade body suggests that such conditions may not last beyond the end of the year. It anticipates a significant drop in overall mortgage lending, but particularly residential remortgage and product transfer activity, which it says will fall by 23% and 25% respectively in 2020.
Commentators have put this down to the fact that borrowers are currently much more inclined to take out longer-term, fixed-rate mortgage deals in order to give them mortgage payment certainty during (what is likely to be) an uncertain period. As a market we are now much more likely to have residential borrowers opting for 3/5-year fixed rates, while the fact that five-year fixed-rate buy-to-let deals remain, for all intents and purposes, outside the PRA regulations means lenders can offer bigger loans in this space for a much longer period.
Ordinarily, you’d expect large tranches of business to be conducted over a two-year cycle, but moving more transactions to a three or five-year deal, means that the business conducted in 2018 – which you would expect to be rebroked in 2020 – is not now going to be available for remortgaging/product transfers until 2021 at the earliest, and more likely to be 2023. That’s unless we have vast swathes of borrowers willing to pay ERCs in order to get out of their deals, and there’s no historical evidence to suggest they are going to be willing to do this.
Add in the political and economic uncertainty – which is undoubtedly fuelling such borrower behaviour – and 2019 (plus the years that follow) begin to look as unpredictable as any we have seen over the past decade. Of course, during that time, mortgage advisers have flourished, but there may well need to be an understanding that change, or a more focused approach on key areas, is required.
This perhaps should focus on generating new blood business – first-time buyers at the start of their mortgage journey’s that can be supported over the next few decades and provided with all products/services. At the other end of the scale there’s those who are close to, or entering into, retirement as we’re likely to see a big expansion in later life lending.
From a regulatory perspective, there may be some changes to digest and integrate into businesses in 2019 and beyond. There are rumblings that the FCA may use its Mortgages Market Study: Final Report this year to look at redefining what advice actually is. Commentators like Robert Sinclair at AMI appear to be preparing the ground for a regulator intent on delivering this; one that is very interested in the provision of technological advice ‘solutions’, with the assumption being that this could impact heavily on advisers and their ability to carry out their job.
I’ve not even mentioned the ‘Brexit’ word – whatever that might mean during the minutes that you read this article – because, of course, this remains the greatest uncertainty of all; the impact of which we cannot fully comprehend or understand, simply because of its unprecedented nature and the fact that we seem so far away from anything resembling a consensus about what it should look like. The Parliamentary tussle on this appears to be nowhere near being resolved, and regardless of what might happen ‘in the end’, we might all kick 2019 off by focusing on the things we can change, rather than the political impasse that we can’t.
In that sense, the positives are around the opportunities that do currently present themselves in the marketplace. This is all about sourcing new clients but also ensuring existing clients are serviced and those who return to you, are given full reviews in order to ensure they have the correct mortgage and cover. Maximising your new and existing client base will be crucial in this environment and we should probably all prepare to expect the unexpected.
Pad Bamford is business development director at AmTrust Mortgage & Credit