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Net lending still half of pre-crisis levels – Changing Shape of UK Mortgages Report

  • 06/12/2019
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Net lending still half of pre-crisis levels – Changing Shape of UK Mortgages Report
UK banks’ net mortgage lending has remained at less than half its pre-financial crisis levels at £50bn a year despite having “recovered strongly,” new analysis has shown.


Net mortgage lending dropped to £10bn a year after the crisis hit.

The changing shape of the UK mortgage market since the global financial crash has been analysed in a wide-ranging report by UK Finance and Hometrack, The Changing Shape of the UK Mortgage Market: Emerging Themes.

New lending has been driven by first-time buyers (FTBs) and buy-to-let (BTL) borrowers over the past decade, while existing homeowners have paid down debt, the report said.

Part two of the state-of-the-nation publication analysed the big market trends.

The role of intermediaries has “grown materially in recent years, underpinned partly by perceived preference within the Mortgage Market Review (MMR),” it said.

The MMR had ”introduced a presumption in favour of mortgage sales being on an advised basis,” the report continued. 

The proportion of residential loans sold subject to advice has reached 75 per cent and 98 per cent when including in-house advice.


Lending profile

Additionally, the report analysed big shifts in the profile of lenders’ mortgage business in the past decade.

Terms on FTB loans have lengthened to 30 years or more in 40 per cent of cases. This is compared to a majority of FTBs opting for 25-year terms in the mid-2000s.

“There are few signs that we’re approaching a natural limit to how much further term lengthening can go,” the report said.

More than half of new lending is scheduled not to redeem until the borrower reaches age 65 or older, with 11 per cent at 70 years old or more.


Growth potential

Fixed products’ popularity was attributed to rates halving on two- and five-year fixes since the crash. More than 70 per cent of mortgage balances are on a fixed rate today. The trend has moved from five years to two years over the past decade and then back to five years during the past year.

The report pointed to remortgage activity having “touched decade highs.” This reflected low funding costs, lenders and brokers proactively contacting borrowers, increased competition and an uplift in housing equity.

However, equity withdrawal by way of a remortgage had remained at historic lows standing at £12.3bn for 2019, compared to £11bn in 2015.

Lending to older borrowers was highlighted as “a market with potential for material growth.”

Lifetime mortgages had grown from a low base to gross lending of £4bn in 2018, though this remained at less than two per cent of total mortgage lending.

Part one of the report focused on the context for mortgage lending and part three made recommendations for the future.

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