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The ripple effect – how the events of 2014 will shape the year ahead

by: Richard Pike
  • 12/01/2015
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The ripple effect – how the events of 2014 will shape the year ahead
The implementation of MMR in 2014 was one of the biggest changes (and challenges) for our industry and will continue to be so this year.

A highly prescriptive and regulated sales process will move lenders and banks back towards intermediated business, i.e. let qualified experts do the work, deal with the compliant sale and pay them to do so.

Banks will still see direct business as the highest risk in terms of selling compliantly and I think it possible that we could see some institutions potentially considering closing mortgage telephone direct to consumer sales centres.

This is not because this channel isn’t what consumers want, (although a long mortgage interview by phone is not ideal and so consumers using this channel are likely to decline anyway), but because it is probably the most difficult sales channel to get right under the new rules. With every call being recorded it is probably the most auditable and therefore easiest sales channel to expose as non-compliant. In some cases it just won’t make sense to keep this distribution channel open from a risk perspective.

However, there will be opportunities for any institution that can distribute efficiently and compliantly as many already do today.

2015 will of course bring a general election. It’s probably too tight to call at this moment in time, but with the potential for disgruntled Lib Dem voters looking elsewhere, these votes could go in Labour’s direction and be enough to create a Labour parliament. In terms of policy, Labour has made noises about setting limits on a bank’s single share of the market and this will only encourage more new entrants to the sector as we have seen with the likes of Cambridge and Counties Bank in the last 12 months.

New banks will mean more competitive products and therefore more choice, and logically this should probably encourage more consumers through the doors of intermediaries to assist in making the right product choices from a whole of market perspective.

Great news is the economy outperforming expectations and I think we can all see this now. Further growth is predicted in 2015 and this is probably the Conservatives’ and the coalitions’ biggest vote winner. A strong housing market and banking industry are two of the backbones of our economy.

Finally the Chancellor has putt a much more logical Stamp Duty structure in place. This will benefit the majority of the public wishing to move. Along with the promise of low taxation and with wages beginning to rise there are probably a number of voters that will take the view if it’s not broken don’t fix it which could of course lead to no change whatsoever.

However, an area that we are still to see the full impact of is the pension reforms announced in last April’s budget, but these won’t change because of the election.

These reforms should lead to further growth in gross mortgage lending in 2015 in areas such as equity release. Because of the changes, a re-vitalised range of equity release products can be expected to come to market through both new and existing players. Add to this the ongoing debate between state and personal contribution costs towards long-term care for the elderly, plus the amount of interest-only mortgages that will need to be repaid at some point and equity release will, I believe, see a major growth in 2015 and beyond.

What we do know is that 2015 will be another year of change and where there is change there is opportunity. Our industry has a great track record of embracing change and dealing with it positively and so here’s to 2015, and may I wish you all a prosperous and successful year.

 

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