One can’t help but come back to the market after the new year break and detect a slight degree of despondency. The reasons for this are slightly difficult to fathom, especially when you consider that, in a very general sense the mortgage market looks healthy with the potential of much more to come.
Lending levels for 2015 look like easily breached the £200bn barrier and I anticipate that, when the CML’s predictions for 2016 do come, they will probably be in the region of 10% uplift on last year. In the mainstream, residential sector, the new year appears to have kicked off apace with numerous lenders revamping product ranges, further cuts to prices being made – so much for the sentiment that they are as low as they can go – and while the uber-competitive 60% LTV product level is pretty much saturated, we are seeing lenders move their attention to higher LTVs.
Not only do we have this but one really gets the sense there is a growing focus on niche borrowers. Particularly those who might have felt underserved in recent years – throughout 2015 we saw much more attention paid to the self-employed, for example, as well as freelancers and contractors. Now we also have products aimed at the newly-divorced as well as other kinds of borrowers like expats, who might ordinarily have seen slim mortgage product pickings.
Other major niches are also starting to develop, for instance, new-build is a growing going concern for many lenders, both mainstream and specialist. The government’s ongoing attempts to get the UK building houses again is translating across into a real zest and interest in providing the finance necessary to get people in these newly-built homes. New build has been a major focus for Stonebridge, especially over the past few years, and having secured a specialism in this area, we certainly anticipate not just a growing borrower interest in these products but also more lenders coming to market with specific propositions.
All in all, there appears much to be positive about. Not forgetting of course the fact the intermediary is firmly at the heart of this ‘new’ mortgage market – both existing and new lenders wishing to come to market can only really support their lending ambitions by utilising the intermediary sector. The percentage of business going through the intermediary channel is said to be up to 70% now, and I see no indication that this won’t increase during 2016.
So, as the barman said to the horse, ‘Why the long face?’ Well, in the mortgage intermediary sector there may not be that high a degree of despondency but I suspect the wider news on the economy is having a dampening effect. Firstly, no sooner had we finished singing Auld Lang Syne than George Osborne was out on the campaign trail warning us of the global headwinds blowing our way. This was quickly followed by the collapse in Chinese share prices, which precipitated big drops in indices across the world. On top of this we have the continued fall in oil prices – good news at the pumps, but clearly spooking investors. And so on.
And of course there are a number of challenges to face in the mortgage market itself. Continued uncertainty about potential rate rises, the introduction of the Mortgage Credit Directive in March and the thought this could provide a tricky period for the market, plus of course we have major changes to stamp duty and tax relief which leaves the UK’s biggest mortgage niche sector, buy-to-let, in a state of flux. It’s perhaps not surprising that many are wondering what happens post-Quarter 1 in this sector.
However, on balance, I still believe there are many more reasons to be cheerful than fearful. Yes, the buy-to-let market will look different in the future, but then again it was changing anyway and there can be no doubts that the demand for rental properties will remain, regardless of attempts to build new homes and move some of these renters to purchasers. My own view is that the buy-to-let market is strong and it will adapt – indeed, we’re already seeing this happening.
So, in the cold month of January, there does still appear to be plenty of news and market indicators that should not only keep you, but your business and clients, warm. The new year pessimism that might pervade should hopefully soon be replaced by a Spring-like optimism, and I suspect mortgage advisers in particular might have plenty to smile about as the year progresses.
Richard Adams is managing director of Stonebridge Group