r low will the outlook for the sector
e a light at the end of the tunnel? month: When do you expect to see signs of market recovery?
The Council of Mortgage Lenders recently reported that remortgage activity in August, both number of mortgages and total value, was down a whopping 19% from this time last year. The CML points out what is painfully obvious to intermediaries: Base rate stuck at its record low of 0.5% since the crash has meant homeowners have had a real disincentive to bother switching lender, so most are staying put. The sector has perhaps inadvertently taught consumers that remortgaging is only worth undertaking if you want to find a lower rate. In our business, a saving grace to some extent is that many
more people are upgrading and extending their current home as an alternative to selling, such that growing numbers of remortgages for capital raising can help to mitigate the absence of rate tarts. Last week the RICS suggested the value of a typical British home would “end 2010 1-2% higher than their current level”. The view was supported by Nationwide which predicted that house prices could climb as much as 10% on an annual basis. If consumers feel that their property value is stable or increasing, they will more readily justify a remortgage to fund home improvements. The question is, can we regard the current downswing as exceptional and cross our fingers for more improved conditions soon? Regrettably I doubt it, unless interest rates rise and startle mortgage borrowers into switching mortgages to achieve rate certainty. In a recent interview a former Bank of England deputy governor warned that the Bank faces “diminishing returns” by adding to its £200bn quantitative easing program. Others add that a further round of QE could mean the economy would require the central bank to raise interest rates. Despite a personal view that we could see no increase from 0.5% for at least another year, many are making headlines predicting a hike in interest rates and borrowers who are about to revert to an SVR might consider that base rate gamble an unwelcome risk. The likely scenario is that they’ll opt to remortgage on an attractive fixed rate whilst they still can.
Rob Clifford, founding director, If I Were You Finance
This means the market might see a more interesting number of remortgages, but frankly I expect a flat 2011.
At the risk of giving a politician’s answer, it depends on what you mean by improve. The UK mortgage market has changed beyond all recognition since 2007. And, although we expect market conditions to ease, we also believe that the ”normal” market of the future is unlikely to look much like either the highs or the lows that we’ve experienced in the past few years. There are two main obstacles to get over before we will see the conditions in place for a sustained recovery. First is the ongoing tightness in funding conditions. Banks must still pay much of the £185 billion Special Liquidity Scheme funding by the end of 2011, but the good news is that it appears that fears over how much money the banks could raise by then have eased somewhat. The securitisation markets were stronger last month with the banks raising more money than they expected. And in the last 18 months, retail deposits have grown by about £80 billion more than the outstanding stock of mortgages. So far, £57 billion extended under the SLS has already been repaid, showing banks are prioritising paying down the SLS. While this is a positive development, the effect of SLS repayment inevitably acts a dampening effect on new business, and means that our optimism must be cautious.
The second obstacle is the threat of unintended consequences of new mortgage market regulation. The Financial Services Authority believes its responsible lending proposals would lead to an improved mortgage market – more stable, and more risk- averse. But, the downside is that this is a market that may exclude many creditworthy borrowers (and hence hit transactions, and lending levels). We would argue that such a scenario does not necessarily look like an “improvement” in market conditions. So, in short, we’re loathe to try to put a date stamp on when
more secure market conditions will be in place. But we know what those better conditions look like. We’ll know things look good when diverse funding lines are sustainable and secure, when we have a proportionate regulatory regime that contributes to recovery rather than one that risks thwarting it, and when consumers feel confident enough in the economy and their own financial circumstances to transact freely.
Jayne Chichester, press officer, Council of
Mortgage Lenders sense. Do you want to be a part of the next Bigger Issue? Email
nia@thepublishinggroup.co.uk mortgage introducer NOVEMBER 2010 23
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56