CCR2 Customer Engagement
Building on a strong position
The mortgage market is looking to its regulatory and performance future after a period of steady growth
Richard Rowntree UK mortgages director, Bank of Ireland UK
Affordability and the changing shape of the mortgage market. Responsible lending and customers with inactive lenders on reversion rates. And the ongoing transition from Libor to Sonia. These are all areas where the mortgage
industry faces profound regulatory changes over the coming years. And they are all issues on which UK
Finance continues to provide guidance to our members, while engaging closely with regulators and policymakers to ensure the best possible outcomes for firms and their customers.
Overview of mortgage market trends Despite the ongoing uncertainty, overall the mortgage market has continued to see steady growth in recent months. UK Finance’s latest figures show there has
been steady growth in the number of first- time buyer mortgages in the year to date. This would suggest that support from
parents and schemes such as Help to Buy are continuing to boost the number of borrowers getting onto the housing ladder. Gross mortgage lending across the
residential market is also holding up at over £22.3bn in September 2019, up almost 4% compared to the same month last year. However, it is too early yet to tell whether
this recent growth will be sustained in the medium to long-term. Meanwhile, there are tentative signs that
the impact of recent tax changes on demand for new lending in the buy-to-let market could be beginning to ease. July saw the first year-on-year increase in the number of buy-to-let loans since October 2017.
30 These figures also show that customer
There are tentative signs that the impact of recent tax changes on demand for new lending in the buy-to-let market could be beginning to ease. July saw the first year-on-year increase in the number of buy-to-let loans since October 2017
And the number of buy-to-let remortgages
has also broadly remained steady, showing many landlords remain committed to the market. But the market has not yet recovered from the change in stamp duty in 2016, and further tax changes are due to come into force next year, so we are far from being out of the woods yet. On the residential remortgaging side, we
have seen a slight cooling off in activity following a busy start to the year. Of course, remortgaging is cyclical and depends on the maturing of fixed-term deals, so it is impacted by borrower behaviour from two and five years ago. We have also seen product transfers
become more popular, with 292,500 homeowners switching product with their existing provider in the second quarter of 2019, up 7% year-on-year. This suggests that many of those who
would traditionally have taken out a pound- for-pound remortgage are instead now switching products internally.
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engagement remains high and the majority of mortgage customers switch to a new deal shortly after their previous deal expires.
Customers on reversion rates and FCA announcement But while customers of active lenders continue to take advantage of being offered a new deal by their existing lender or shop around for a remortgage, some borrowers with inactive firms remain on reversionary rates higher than market average. This is, of course, an issue that the FCA
has been focusing on, announcing new rules last month aimed at helping these customers switch to a new deal. The regulated mortgage industry supports
the FCA’s objective of helping creditworthy borrowers on reversion rates switch to a better deal. Indeed, the voluntary agreement
implemented by the industry last year led to 26,000 customers of active lenders being offered a new deal. We are now looking forward to the
FCA publishing up-to-date information on borrowers with inactive firms. This will give us a better sense of how
many customers may be able to be helped and inform the industry in developing products that meet these customers’ needs. However, it is important to remember that
it will be up to individual lenders whether they offer products under the new rules, depending on their current commercial and risk appetite. Given the complex changes that lenders would need to make to their lending
December 2019
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