Bob Young is managing director of CHL Mortgages
For some unknown reason, the beginning of a new year turns us all into amateur psychics as we boldly state our predictions for the year ahead. It’s a shame these forecasts never seem to include the Grand National winner or next Saturday’s Lotto numbers, but concentrate on more routine affairs like business performance and expectations.
Extrapolating patterns from previous years and identifying emerging trends can give us some idea of what lies ahead, but it’s still hard to make specific assertions about the future. After all, how many of us saw the Credit Crunch coming, or envisaged it would rumble on for as long as it has?
Nevertheless, the usual suspects have made their projections for 2012 and the general consensus seems to be a similar 12 months to that we saw in 2011.
The Council of Mortgage Lenders (CML) is predicting £133bn of gross lending and £5bn of net lending in 2012 and 27,000 fewer transactions. It also expects 45,000 repossessions over the coming year; up 8,000 on 2011, but below 2009 levels and far lower than the recession in the early 1990s.
Members of the Intermediary Mortgage Lenders Association paint a similar picture, with their gross lending forecast sitting at £130bn for the year ahead. Its associates expect modest GDP growth of 0.91% and inflation to reduce to around 2.79%.
However, while the wider mortgage picture looks fairly staid, things look fairly positive for the buy-to-let market.
As Assurant’s Kevin Paterson recently pointed out in this very title, buy-to-let “continues to be the one silver lining in an otherwise grey cloud hanging over the mortgage industry”.
Recent figures from the CML would appear to back this up, with the number of new buy-to-let loans increasing by 16% in the third quarter of 2011, culminating in the sector’s highest lending figures since 2008.
With mortgages still out of reach for many, demand for rental properties is likely to remain strong into 2012 and beyond.
Encouraging though these figures may be, they still fall some way short of the heyday we saw in 2007.
This isn’t necessarily a bad thing however, as not only were house price and activity levels from back then unsustainable, but brokers are often able to prove their worth even more in a modest market.
With less product choice and stringent LTV criteria in place, customers are more likely to turn to an intermediary to help them get the best deal possible.
While IMLA members may have painted a modest picture for the year ahead, they have a more optimistic outlook for the long-term landscape.
By 2016, its affiliates expect introducers to account for 59% of the first-time buyer market, 60% of the remortgage market, 51% of the home mover market and as much as 82% of the buy-to-let market.
If the final figure does come to fruition it will be great news for introducers in the buy-to-let space and it is not beyond the realms of possibility given the extra complexity involved in handling such cases compared to residential mortgages.
It would be remiss to sign off a column about predictions without making some forecasts of my own, but they represent something of a wish list rather than tips you should be placing any money on.
One aspiration is to see a level of decisiveness when it comes to potential regulation of buy-to-let. I have often been vocal in my viewpoint that buy-to-let deserves to remain outside the auspices of regulation, and that belief has not changed even with the publication of the MMR and the forthcoming European Mortgage Directive.
As the MMR itself states, ‘Regulation of buy-to-let remains a decision for the Government’.
This is one area where, in my opinion, it would pay for the Government to maintain the status quo.
Beyond that, let’s just hope that the mortgage industry can continue to withstand the wider economic pressures and can emerge out the other side of this economic downturn leaner and fitter than it was before.