With Christmas looming we are heading towards the time of year when, traditionally, people sit back and take stock, but for the mortgage industry 2002 has passed in such a whirlwind of change that it is hard to know where to start.
At the start of the year the talk across the industry was of an easing in house price growth, with most commentators saying house price inflation would begin to plateau and some even predicting a crash. But according to figures from Halifax, the annual change in house prices between November 2001 and November 2002 has seen a staggering increase of 29.2%.
Nick Baxter, managing director of broker network, Mortgage Promotions, says: ‘Despite predictions from some quarters, the housing market did not crash this year and everyone in the industry has seen buoyant levels of business throughout the year.’
However, as Steve Sandiford, head of borrowing products at Birmingham Midshires Solutions, points out: ‘The actual number of new transactions has remained pretty stable which was possibly due to a lack of properties in the market.’
With the number of new loans not rising in keeping with house prices, high levels of remortgaging activity in the market have helped sustain this price growth.
Having maintained a high level in 2001 it increased considerably in 2002, earning those borrowers who were astute enough to move their mortgage themselves (or do so on the advice of their broker) the unflattering moniker of ‘rate-tarts.’
John Malone, national mortgage manager at Prudential’s Premier Mortgage Service club, notes: ‘It has been a year of records, with record levels of lending in the mortgage market, both gross and net. We have had the highest level of remortgaging on record, with an average of around 40% of mortgage business, and we are predicting this to rise to 45% next year.’
However, what did not happen can often prove just as important as what did, and earlier this month, when the Monetary Policy Committee decided to keep interest rates at 4%, it meant they had been kept on hold for a record 13 months in a row. By holding rates at the lowest level for over 30 years over a sustained period, mortgage repayments have remained affordable as part of income, which have, in part, allowed house prices to rise as they have.
Unsurprisingly, the lenders have applauded these decisions as a prudent move, lending stability to the market.
John Webster, managing director of Preferred Mortgages, says: ‘We were taken by surprise that interest rates did not increase this year as they were expected to do so this time last year. And consequently there was the continued surge in house prices.’
Of course, from the point of view of mortgage intermediaries, 2002 has been the year of exams, and it has been fairly difficult to ignore the spectre of mortgage qualification and the 31 December deadline.
Nevertheless, it has only been in the last few months the bulk of advisers have sat the various papers. The latest figures from the Institute of Financial Services show over 28,000 have now passed the CeMAP exams, with others now trying to pass in the last few weeks of the year.
Chris Fleetwood, managing director of Paradigm Consulting, says: ‘It mirrors the situation when IFAs had to pass their FPC exams and left it late as well. For those of us who have been around long enough it is a case of history repeating itself.’
Webster agrees: ‘In terms of intermediaries passing their exams we will have to wait until January to find out who we are dealing with, although we are expecting a last-minute stampede. The question most of us want to know is: will they drop down to introducer status or join networks? While lenders are not responsible for policing it, they want to know how many are going to stay offering full advice.’
It is also hard to talk about 2002 without statutory regulation featuring heavily. At the end of last year, the Treasury made its shock announcement to regulate mortgage and general insurance advice and the past 12 months have been filled with consultation papers and debate as to whether the Financial Services Authority (FSA) would listen to the suggestions of the industry.
On the whole the high-level consultation paper, CP146, was well received and the industry can now only wait to see how the FSA deals with the suggestions and criticisms received before the 11 November deadline.
Nevertheless, when a document such as this tries to deal with a sector as complex as this, there are bound to be some areas that are neglected or omitted. But it was surprising for some that buy to let, one of the fastest-growing areas of the industry, will escape proposed regulation.
Buy to let has been the phenomenon of the market this year, helped in part by the continued poor performance of the stock market. As the consumer press built up the buy-to-let boom, it helped to create a £14.7bn sector, dragging it out of the niche market and into the mainstream.
Sandiford says: ‘Leaving out second-charge loans and buy to let was a big mistake. The popular press got hold of it this year and it is a product that is here to stay. With the pensions scandal still fresh in people’s minds, more people have got into it and more are now in it for the long term.’
This year has also been the year when the industry has been made aware of its position in Europe, with various pieces of European legislation threatening to impact on mortgage business in the UK.
Stephen Knight, executive chairman of GMAC-RFC, warns: ‘Regulation is not just about domestic regulation, and European regulation such as the Basle Capital Accord will have noticeable impact on the way lenders do business.’
This may only be a snapshot of the year, but as for predictions of a market crash next year it would be advisable to heed the lessons of the past.
Knight sums it up when he says: ‘This has been the year when those people who have been willing to step up and say doom and gloom is just about to happen have been proved consistently wrong.’
Ben Marquand is editor