News Review: Specialist Prime Lessons from history show there are reasons to be positive


by Mark Stephens, group managing director, mortgages division Aldermore


Having lived through the economic recessions of the early 1980s and 1990s, i know from first-hand expe- rience that not only will the uK mortgage market survive the current downturn, but it will probably be stronger as a result of all it has endured. this concept may be hard


to accept at the moment, es- pecially for those thousands of financial services employ- ees who have recently lost their jobs, but history tells us that economic down- turns can act as a catalyst for change and those changes underpin the next phase in a market’s development. i suspect we’re in for at least another year of difficult trad- ing conditions, but i do be- lieve there are reasons to be optimistic.


2010: a tough year 2010 has undoubtedly been a tough year. Bank Base rate has remained at 0.5% which, although good news for the two thirds of all uK homeowners with variable rate mortgages, has provided no incentive for borrowers to remortgage - a blow to a market which has been so important to brokers in the past. unfortunately, the house


purchase market has fared no better and has remained pretty stagnant throughout the year. the latest figures from the council of mort- gage Lenders show that


50,000 loans for house pur- chase were granted in Sep- tember, which is unchanged from august and down 2% over the past year. Likewise, the number of loans for first- time buyers has fallen by 6% over the past year. remort- gages are also down - by 12% over the past year. However, although we


have seen decreases in lend- ing activity over the past year, we have also seen increases in first-time buyer activity and particularly remortgag- ing over the course of the past month. When analysed over the


past quarter the figures look even more encouraging: house purchase loans are up 13% by volume, first-time buyer loans have risen by 8% and remortgaging 6% by volume. Buy-to-let lending is also up 12% in Q3, support- ed by increased demand for rental property. it needs to be remem-


bered, however, that the total volumes of mortgage busi- ness being transacted are still at record lows (total lending in 2010 will be approximate- ly £140 billion, which is just 40% of the volume of lending in 2007, according to the lat- est cmL forecast); we’ll all be waiting with baited breath to see if the positive trend over the last quarter continues.


Confidence Whether it does or not will depend on two key factors: consumer confidence and money supply. confidence is currently at a low ebb and there is little to sug- gest an imminent change in fortunes. However, this is a good time for homeowners


to consider remortgaging in order to lock into some of the excellent fixed-rate mortgage deals that are cur- rently available. the first quarter of 2011 will, there- fore, present an excellent opportunity for brokers to renew contact with cli- ents, particularly those who took out three and five year fixed-rate deals prior to the credit crunch, to consider if remortgaging is an appro- priate course of action.


Funding the second issue which will underpin a revival in the fortunes of the mortgage market is funding capacity. Wholesale funding is still very challenging and retail funds are also in short sup- ply; in fact, the current sup- ply of retail funds is insuf- ficient to support a ‘normal’ housing market. the big six banks currently account for more than 90% of all new lending; when the cmL compiled its top 30 lender list this year, it struggled to find 30 significant lenders to include within it! However, mortgage Brain


says that the number of mortgage products has in- creased by 57% this year, with more than 2,600 new products being launched into the intermediary mar- ket during 2010, taking the total number to 7,320. We’ve also seen the launch of new lenders aldermore and Pre- cise, as well as the much wel- comed relaunch of Paragon. 2011 will undoubtedly


see further launches, with major high street brands such as tesco and Virgin announcing their intention


to become lenders. the big question, of course, is will they deal with intermediar- ies or go direct? i suspect tesco will want to leverage the power of its brand and launch a direct service, but Virgin may be more inclined to deal with brokers. time will tell.


Intermediary sector the intermediary sector has shrunk in proportion to the reduction in new lending, with the number of reg- istered mortgage brokers down from approximately 30,000 to somewhere nearer 10,000 today. Will the num- bers fall still further next year? Personally, i doubt it. intermediaries still account for 71% of all new first-time buyer loans, 57% of home- mover loans and 59% of remortgage loans (by vol- ume), according to the cmL. interestingly, these figures are almost identical to those of the first quarter 2007, in the halcyon days before the credit crunch. consumers still value professional ad- vice, it would appear. So, looking back over 2010


it’s been a difficult year in which the mortgage market has largely remained in the doldrums. Looking to next year, we’re undoubtedly in for continued challenging trading conditions, but there are reasons to be positive. History has also taught us that when the mortgage mar- ket has emerged from reces- sion in the past, it has gone on to become stronger than ever before. Have a good christmas


and, fingers crossed, a pros- perous new Year!


mortgage introducer DECEMBER 2010 15


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