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concept of interest only - 5% deposits were unheard of, never mind 125% lending - whereas for us, it was as given as breathing air. What’s more they seemed to have a ridiculous ‘affordability model’ where they actually looked at your monthly income and expenditure to see what’s left over for meeting mortgage payments. It all seemed archaic and short- sighted. Worst of all, intermediaries were a rarity and most of the lending was done direct. The differences between ‘us’ and ‘them’ couldn’t have been more contrasting.
Today’s markeT
So where are we now? 5% deposits are
priced so high up the shelf that nobody can or wants to reach for them; there’s no such thing as self-cert anymore; everything is based on an ‘affordability model’ and Santander want to bear their continental influence on us by rolling out repayment-only mortgages soon. Whilst they haven’t actually done so yet, I am reliably told that when using the A&L affordability calculator, one must use the repayment model even if the mortgage is on an interest-only basis as this is how the underwriters will assess cases – this being the precursor to rolling out mortgages which are repayment-only as a matter of policy.
I am not being critical of these changes but merely observing how
Stephen Smith,
director of housing, Legal & General
Perhaps there has never been a ‘normal’ in the mortgage market. Neither a ‘normal’ level of gross lending, nor a ‘normal’ level of housing transactions, house price inflation, remortgage activity or repossessions. As each year passes, we can look back at it and say why it wasn’t ‘normal’? It was either overheated or artificially depressed, in a decline or on the road to recovery. Perhaps the only certainty has been uncertainty.
After the turmoil of the last three
years, which have shown that even the best informed experts really didn’t know what was going on, I find it is helpful simply to take stock of the current position and see if we are headed broadly up or down. And in my view, we are not in for a period of further market decline or stagnation - the outlook is firmly up. That’s not to say there won’t be some rocks along the road, and I’m not saying we are set for a return to the (far from normal) years of 2006 and 2007.
Why am I optimistic? Because most
20 mortgage introducer MAY 2010
indicators of activity in our market are pointing up, and for those businesses who have made it through the recession to this point, the opportunity for increasing volumes and market share is very real.
GROSS LENDING
This is forecast by the CML to grow from circa £144bn last year to £150bn. But most of our major lender contacts are more bullish – quoting target figures of £160bn or more. Intermediaries can therefore look forward to a 10%+ growth in their market over this year – and more steady growth next
INTERMEDIARY SHARE
Most of this new lending will come back via intermediaries, as the branch and direct operations of the major lenders do not have further capacity or ability to deliver.
NUMBER OF LENDERS
Look forward to half a dozen or more new or returning lender launches this year – mainly intermediary focused and operating in both residential and buy-to- let markets.
NUMBER OF PRODUCTS
From a low point of last August, the number of products available to
THE DEMOGRAPHIC UNDERPIN
People haven’t stopped getting married, divorced, becoming parents or falling out with their neighbours over the last two years – there is a pent up demand to move home, and the UK is still not building enough homes to meet demand.
RETURN OF THE REMORTGAGE
As interest rates rise – perhaps next year – and lenders regain some freedom to manoeuvre we may see a return to higher levels of remortgaging.
Against these positives are ranged the negative pressures of the funding problem, the possibility of a further period of recession, and the uncertainty caused by the election and its aftermath. But it seems clear that a careful progressive return to more healthy levels of transactions and gross lending, underpinned by proportionate regulatory strengthening coming from the MMR, is what we can look forward to for the next two to three years.
things have made enough of an about- turn to reflect how it’s done in Europe. What’s more, we have many of the best deals on the market, only available directly, with the intermediary share of the market having shrunk considerably from its peak. I can’t help thinking that it’s the Europeans who might be the ones laughing at us now.
ouT of The Loop
Lenders’ relationships with brokers have always been strange ones. We relied on each other whilst putting up with each other’s idiosyncrasies. When everyone was making money and the pickings were bountiful, this was a tolerable enough situation
intermediaries has doubled by this spring.
LOAN TO VALUES
And there are products back now at 90% and a few at 95% - essential to get the market moving again.
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