Bob Hunt is chief executive of Paradigm Mortgage Services
As we reach the end of the 2017, I can’t help thinking about the song, ‘It’s not where you start… it’s where you finish’, and wondering whether those in our profession can look back on a year of positivity and growth in which your current position shows a real improvement on what might have been back in January.
Interestingly, it took me a quick trip to Google to find out which musical that particular song comes from. Any guesses, without doing the same? It’s actually called Seesaw – not one that I’m too au fait with it has to be said – although the title might certainly sum up this year in the mortgage market, especially when you add in the very numerous (and serious) political and regulatory ramifications that have hit us all.
The ups and downs of this year in our market have, I suspect, led to some serious re-evaluation being carried out particularly by a number of our lender friends in recent months. Indeed, there are probably a number lender executives who would not have envisaged their business moving into certain product areas which might well have been deemed ‘off limits’ prior to this year.
How else might we explain TMW’s recent decision to move into limited company buy-to-let lending or Accord’s decision to offer interest-only repayment options across some of its range?
Other lenders I am sure are looking at entering other parts of the market – perhaps later life lending or equity release, or adverse credit – in terms of a reaction to what has taken place throughout 2017.
Of course, the buy-to-let market has seen more than its fair share of changes over a 12-month period, and TMW’s move might well have been a ‘needs must’ situation but – even though it only appears to be toe-dipping at present – given the rise in purchasing through limited companies, then it would appear to be a ‘no brainer’ for any lender that wants to maintain its purchase activity.
Other ‘mainstream’ buy-to-let lenders look likely to follow and it will be interesting to see how their systems, processes, criteria evolve to order to meet borrower (and adviser) demand in this area.
Looking at what 2018 will bring for the mortgage market, I can’t help thinking that we’ll see some significant change and activity in the later life lending market.
At the recent Government Select Committee meeting on the availability of housing for older people, Mark Bogard of Family Building Society was quoted as saying the big six lenders ‘can’t be bothered’ to lend to older borrowers because of the increased complications they bring, the need for individual underwriting on such cases, and for fear of a PR disaster if they were seen to be getting heavy-handed by ‘kicking a little old lady out of her home’.
Well, that’s certainly one way of looking at, but I don’t think we should underestimate the ability of the ‘Big Six’ to view the changing demographics of this country, the increase in demand for such products (and equity release) and to acknowledge that there could be a profitable market to be had by adding these products to their propositions.
Again, we’ve already seen Nationwide announcing it is to offer its first lifetime mortgages, and one might suggest that the provision of these products is fraught with far more potential banana skins for a mainstream lender, than simply offering mortgages to later life borrowers.
It would be very surprising not to see larger lenders not just opening up, in terms of products to those in later life, but also potentially squaring the circle by offer equity release products as well.
Again, just 12 months ago, would we have felt confident in predicting that mainstream players would be offering equity release products after they had seemed pretty steadfast in their refusal to do so up until then? Probably not, but the mortgage seesaw moves up and down pretty quickly, and when you add in the merry-go-round of product competition, borrower demand, and lending targets, you get an explanation of why lenders are now much more willing to look further afield than their traditional ‘hunting grounds’.
2018 will also bring with it a further raft of ‘big ticket’ changes, not least the Open Banking reforms which will start off relatively small in the form of current account data, but will soon spread wide and far, and should be a real boon to advisers as they seek to prove client affordability with lenders.
We’re already seeing market solutions being offered in this area, to support the Open Banking measures, and I suspect this type of proposition will figure heavily throughout the next 12 months and beyond.
So, a lot has changed during 2017 – we have (almost) finished quite a long way from where we started and the expectation must be that lenders will be willing to move even further in the months and years ahead.
For advisers – and their clients – this collective ‘opening up’ seems a real positive and it will be interesting to watch as more market players look to settle beyond their traditional mortgage walls.