As we head toward the half-year mark, thoughts and projections move towards where the year-end gross lending figure will finish, which is generally a good indicator of how healthy the mortgage market is. Current estimates are around £240bn which would show a 9% increase, so positive vibes. However, this figure is only three quarters of the true story.
There is a hidden market that needs to come out of the shadows if we are to fully understand the true market position. This newbie is the product transfer or retention market. It is estimated that this market may be worth in the region of £80bn this year which could be upwards of 500,000 transactions, depending upon the average loan size. This is a major contribution to lending and needs to be formally recognised. There is no real figure available but anecdotally it seems that only 20% of this is submitted via intermediaries.
So why do we need to understand these numbers? Historically a large chunk of this £80bn would have still switched rates but would have been done so via a remortgage and so been included in the normal CML figures. Remortgaging has been subdued for a number of reasons but many borrowers have still taken the opportunity to change rates but remain with their current lender for either ease or criteria reasons.
I would like the CML to start to publish this data in the same way they do for purchase and remortgage data. I would like to also see them publish the split between intermediary and direct plus and most importantly the split between advised and execution only. It is important for all to understand the buying habits of the borrower.
All lenders have their own retention strategies and this is expected as they look to manage their back book, but as more start to offer intermediaries retention fees we need to see greater transparency. As an intermediary market we also need to step up to the plate. We make a lot of noise about wanting lenders to offer retention fees yet maybe we could do more. It is accepted that we cannot transact with some lenders, even for no fee but if we want to work in this market and for lenders to remunerate we need to improve our client retention strategies.
So that’s two challenges for the market moving forward. These are for the CML to publish the data and for intermediaries to embrace the opportunities. If both happen, then borrowers will be getting the best advice, which is surely the best outcome.
