Surging growth of consumer credit comes as Bank of England research shows half of all UK households with a mortgage say they have found it easier or cheaper to get a personal loan than to raise further funds through a remortgage, second charge or further advance.
The worrying trend raises the question that tightening in mortgage lending may have gone too far, and was encouraging consumers to turn to other more expensive forms of debt, the AMI said in its latest quarterly economic bulletin.
The report said: “Continued growth and households’ clear reliance on unsecured credit raise perhaps uncomfortable questions over whether tightening in the mortgage market, where there is underlying security with potential for capital growth and where rates of interest are consequently far lower, has gone too far and is encouraging households to take on debt in other formats.”
Transactions and approvals to remain flat in 2018
The trade body also forecast mortgage approvals and housing transactions were set to remain flat in 2018, as the remortgage markets drove a rise in overall lending.
Rates across the market will remain very competitive and margins narrow over the coming year, the trade body predicted in the report.
However, high loan to value (LTV) rates and new build rates may lift in the next 12 months, the AMI added.
Gross lending is expected to rise to £265bn, and brokers will continue to offer value in specific markets including buy-to-let, self-employed and lending into retirement.
Regulating product transfers
The AMI also stressed that the regulator expects intermediaries to take product transfer clients through the same process as a remortgage.
Open Banking rules and liability poses some “significant” questions for brokers and the digitisation of advice, the trade body said.
Brexit has also been highlighted as a consideration for 2018 – with political changes potentially affecting the housing and mortgage markets amid changes to migration, the value of sterling and foreign investment appetite.