Once again the mortgage industry has had lots going on over the year.
So we asked this week’s Marketwatch panel what have been the biggest lessons of 2018 for the mortgage market.
Craig Hall, head of broker relationships and propositions, Legal & General Mortgage Club
Like previous years, 2018 was no less full of changes.
Firstly, it’s undoubtedly been the year of product transfers (PTs).
For the first time, UK Finance began publishing PTs and while there was a recently acknowledged error in reporting, the market is still much larger than previously anticipated – around £150bn.
PTs are a huge area of opportunity for advisers, considering that over 187,000 transfers were execution-only.
The FCA’s competition review suggested a growing return to execution-only, but here is where we must champion advice and the invaluable role brokers play.
First-time buyers also had a successful year, with record numbers taking their first step onto the ladder.
Government schemes like Help to Buy and Shared Ownership have been crucial, as well as continuing support from the Bank of Mum and Dad.
Next year, we may even see first-time buyer transaction levels overtake home movers.
Another growth story has been the later life and retirement interest-only market.
Lifetime mortgages are set to reach £4bn this year, up from £3bn last year.
The broader later life market is expected to be approximately £60bn this year.
This is for several reasons – we’re living longer, have greater pension freedom and older homeowners are helping loved ones onto the property ladder.
Lastly, this has been the year of laying the foundations for the ‘frictionless mortgage’.
While we may only be in the embryonic stages, the market has really begun to embrace technology and change, rather than fear it.
In 2019 and beyond, it will play an increasingly key role in the market, and there are certainly plenty of opportunities on the horizon.
It would be an understatement to say it has been a year of unpredictability.
Speculation about a fall in property prices, against a backdrop of uncertainty, seems to have influenced house buyers, with many discretionary purchasers sitting on their hands.
This is particularly true in London and the South East, where we’ve seen a recent dip in house prices.
Our latest Halifax House Price Index showed price growth has slowed as we approach the end of the year, falling from 1.5% in October to 0.3% in November.
While this is the lowest rate of growth in six years, it remains within our forecast range of 0% to 3% for 2018.
Despite the downward adjustment of market product transfer numbers recently by UK Finance, remortgage and product transfer volumes combined still remain a significant part of the market.
This is why maintaining strong customer relationships is more critical than ever.
The tech industry continues to grow at speed, with digital developments being made on a daily basis.
It wasn’t just tech start-ups dominating this market, but also long-standing mortgage lenders and brokers that introduced new technology, demonstrating significant investment in this space.
The lesson here is that lenders and brokers must continue to develop, innovate and keep up with competitors to attract and retain customers.
Despite gloomy market predictions and continuing flow of industry change, the buy-to-let industry demonstrated its resilience, weathering the changes and remaining buoyant.
Nick Morrey, product technical manager, John Charcol
This year has been a typically busy one for the market as a whole.
Property values have claimed the most column inches again.
Lending has been very different this year with the strong performance of product transfers, a hitherto unreported amount that is set to grow yet further.
Older borrowers received attention from the introduction of retirement interest-only mortgages but take up from lenders was low – especially from the big lenders.
One of the growing trends through 2018 has been the realisation within lenders that the total new lending pie is shrinking, and the traditionally rich vein of London purchase mortgages is currently the cause.
To try to hit their lending targets many lenders see the need to compete on criteria – not rates.
Some changes have come in already but I think 2019 will see a lot of lenders bring out changes that could have been done years ago.
The interesting aspect is if they all loosen criteria in certain areas, self-employed, interest-only and joint borrower sole proprietor as examples, then everyone will do so.
When everyone does the same thing then no one will stand out.
True invention will be required, which is not easy for the larger lenders.
Another aspect of broking that has changed this year is sourcing of criteria.
To a certain extent, Knowledge Bank and Criteria Hub have managed what brokers have sought for years – one place for multiple lenders’ criteria.
They will not be the last in this space I am sure.