The key date carved into every desk diary in 2014 is 26 April – the launch of the Mortgage Market Review which is considered to be the most important event to affect the industry since regulation enveloped the market on M-day 31 October 2004.
But what other obstacles will the market have to overcome this year?
For this week’s Marketwatch, our commentators are:
Kris Brewster, head of products at Skipton, will be watching the Bank of England closely to see if they intervene to curtail house price inflation
Toni Smith, sales operations director, First Complete, weighs up the challenge of dealing with a longer sales process due to the MMR in the face of increased demand
David Hollingworth, associate director, communications, London & Country Mortgages, looks to rates and considers what factors will affect their rise and fall over the year
Kris Brewster, head of products at Skipton
Against the backdrop of the Mortgage Market Review, Help to Buy and the end of the Funding for Lending Scheme, 2014 will present many new opportunities for lenders.
There will also be fresh challenges to overcome as changes resulting from the Mortgage Market Review are implemented including the introduction of advised mortgages and the training which lenders will need to undertake to bring their customer facing teams up to speed.
It will also be interesting to see how the Help to Buy mortgage guarantee scheme plays out and which lenders sign up for 95% lending under that umbrella.
Critically a question mark also remains as to whether the Bank of England will step in with moves to limit house price inflation and the growth of the mortgage market as it did recently with the early withdrawal of the Funding for Lending Scheme in order to counteract any threat of a housing bubble.
Significant house price variations between the north and south will continue to be a focal point as will the Help to Buy shared equity scheme, as well as whether there will be enough new-build stock to meet demand.
We may see some lenders relaxing their risk and lending policies to either support increased lending or entering niche lending areas. I also think we’ll see a further increase in natural market share from mutual lenders.
Toni Smith, sales operations director, First Complete
The biggest issue facing the mortgage industry this year will, of course, be the MMR – the biggest change to regulation that we’ve seen for ten years. The second biggest issue is likely to be the shortage of housing.
The implementation of the MMR will mean significant changes to process and the re-training both of lenders’ in-house advisers and of mortgage brokers. The expectation is that each mortgage will take longer to both advise on and to process, and this will happen at a point when demand is increasing significantly.
The increase in borrower demand is already stretching many broker firms to the max as they manage to respond to increasingly high volumes of applications with fewer staff than before the credit crunch – and this is before the mortgage advice process significantly increases in length.
On top of this, brokers will need a huge knowledge update as the MMR demands that they understand the criteria and product details of every lender they deal with and sets a requirement for them to capture more information.
At the same time, the housing shortage tallied with greater demand to move house is likely to increase the pressure to complete a mortgage as quickly as possible as housing is more likely to go to those who already have their finances in order.
David Hollingworth, associate director, communications, London & Country Mortgages
There’s a lot to be optimistic about in the coming year as January carries on where last year finished with a brisk start. Competition in the market is strong and borrowers are increasingly aware of the extremely attractive rates available.
That demand is already showing in some of the house price data feeding through and with more lenders due to participate in the second stage of Help to Buy the options for aspiring buyers should improve further.
To counter that the Funding for Lending Scheme will be withdrawn for mortgage lending and that could have some impact on mortgage rates although it would be a surprise if there was a sharp rise.
Talk of the base rate rising and upward pressure on mortgage rates is only likely to heighten borrower interest in fixed rates and I’d expect they will remain the clear product of choice throughout 2014.
Perhaps what is hard to gauge is whether the implementation of MMR will cause much disruption. The change in recent years will mean that prepared brokers may only need to make tweaks as April approaches. Lenders will inevitably have significant change to deal with, not least on the advice side, and that could slightly dull the ferocity of competition in the market for a time.
