News Review: Specialist Prime
Food on the table for resourceful brokers
by Charles Haresnape, managing director, residential mortgages Aldermore
the stream of statistics which regularly cast light on the state of the mortgage and housing markets are not giving any cause for optimism. the story seems to be one of subtle changes but nothing that signifies the start of a genuine recovery. there were 32,300
mortgages granted for house purchase in February, up 8% by volume and 5% by value from January (good news) but down 12% by volume and value from February 2010 (bad news). a similar picture emerges when you look at remortgaging: the volume of loans increased by 5% over the previous month, but the value fell by 3% over the previous year. the first-time buyer market also showed a month on month increase (13% by volume) but a year on year decrease (-11%) and the same story was replicated with home movers (up 6% by volume month on month, but down 12% year on year). the story seems to be
one of a market which is continuing to bumble along the bottom. the big falls have happened but there is no real sign of a significant upturn. the council of mortgage Lenders forecast that the volume of mortgage business written this year would be very similar to last year and, although we’re only a third of the way into the year, that’s exactly how it appears to be panning out.
the truth is that there’s
still precious little good news to stimulate demand. government spending cuts are really starting to bite, especially for those working in the public sector who are seeing their jobs being put at risk. Private sector workers are also facing job losses and severe pay constraints. consumer confidence is
low and the flow of mortgage funding remains restricted. more encouraging though is the number of mortgage products on offer are increasing, with mortgage Brain saying that over 500 new deals were launched in march taking the total number to 10,418, a 5% increase over February. it also said that fixed rate deals were particularly popular, with 602 new products being launched. it will be interesting to see
whether fixed rates continue to be popular over the coming months following speculation that an interest rate rise may not be as imminent as we all thought. the forecasters are now suggesting that it may well be autumn or later before we see rates starts to rise and if that is the case, borrowers may be inclined to hang on in with existing variable rate deals or opt for tracker products.
Remortgage Speculation about a possible rate rise has fuelled some interest in remortgaging although it has not yet resulted in what could be described as a sustained uplift. But if homeowners start to believe that rates may
24 mortgage introducer MAY 2011
remain low for some time to come then it may suppress any recovery in this particular sector. continuing low rates are definitely a double-edged sword. although they’re good news for homeowners, which let’s be honest is the most important issue, stable low rates do nothing to encourage borrowers to remortgage before rates rise in the future. all the evidence appears
to be that borrowers are happy to continue enjoying the benefit of low monthly mortgage repayments and to pay down their debts. good news for homeowners; not so great for brokers and lenders.
“If homeowners start to believe that rates may remain low for some time to come then it may suppress any recovery”
Buy-to-let the one bright spot on the horizon continues to be the buy-to-let market. Brokers who are active in this market are reporting increased demand from landlords and the number of new products has also doubled over the past year. rents have also been on the rise with demand for good quality rented accommodation continuing to strengthen.
Will 2011 be a re-run
of 2010 for brokers: a flat market, economic doom and gloom and precious little to get excited about? not necessarily. although i don’t see any reasons for a sudden upturn in the near future (perhaps the royal wedding may generate a feel good factor - but i suspect i’m grasping at straws), i do think that we have at least hit the bottom and the road ahead may well be one which leads to a slow but steady recovery.
Specialist opportunity i also think that there will be pockets of opportunity for enterprising brokers. even in a tough market there are housing hotspots and also specialist niches such as mortgages for creditworthy borrowers being rejected by inflexible credit scoring systems, larger loans and solutions for hard-pressed first time buyers. all of these sectors give
brokers the opportunity to add value by helping borrowers who are struggling to find suitable financial solutions themselves. it’s easy to get depressed
in such difficult market conditions but it’s worth remembering that the uK housing market has not fundamentally
changed.
We’re a nation still firmly wedded to the idea of home ownership and long-term, demand for housing will continue to outstrip supply. Yes, we need a stronger economy, greater consumer confidence and a better supply of funding but all these factors are a question of when and not if.
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