Nick Chadbourne is chief executive of LMS
2017 was a transformative year for the mortgage market.
The Bank of England raised the base rate for the first time in a decade. The number of remortgages skyrocketed to levels unseen since the credit crisis. Canny consumers flocked to capitalise on record low rates. Demand for five-year fixed rate deals surged.
What about 2018?
We think the housing market will be subdued. Prices will be stable with perhaps some, limited, growth.
The Bank of England has made it plain further rate rises are on the horizon. Inflation and stifled wage growth will put pressure on household finances. This will limit the demand for home moves.
That will be tempered somewhat by the Chancellor’s plans to reduce stamp duty for the lower thresholds while also committing to build 300,000 new homes next year.
But there’s no question that we’ll see more focus from lenders, brokers, and consumers on remortgage.
With this in mind, LMS has spent some time thinking about what the next few years might have in store – for the mortgage market in general and the conveyancing space in particular.
5-year fixed deals will continue to dominate the market for the foreseeable future. Locking-into low rate deals for the long term offers consumers a level of security; savvy borrowers will keep capitalising on record low rates.
As rates slowly rise over the next few years, we predict each increase in the base rate will act as a trigger point and incite borrowing activity – consumers will flock to secure low rates before the next hike.
There are benefits to variable mortgage though and these will become increasingly clear as people adjust to the new interest rate environment.
The flexibility variable rate product provide can be a huge benefit for the right borrower. They’re a great option for anyone looking to move sooner rather than later as they tend not to hit borrowers with big early repayment charges. Their fees are lower. And rates are still very low in a historic context. Any rise will likely be slow and gradual.
So lenders and brokers are going to be busy. This will drive competition. Lenders will either need to be innovative with their products or differentiate by their service delivery or technology solutions.
Some may use a combination of strategies but we certainly expect increased competition in the remortgage space.
Lenders, as well as brokers and conveyancers, will try to offer an increasingly ‘joined-up’ service to make mortgaging and remortgaging as easy as possible for borrowers.
Making conveyancing easy
Over the last year, the increased volume of transactions has put pressure on all parties within the conveyancing market. As a result, a number of improvements have been made.
Over the course of 2018, we will see more.
To deal with the increased volume of transactions, conveyancers have had to work more closely with lenders, brokers, and property lawyers, which has driven efficiency and improved the customer experience.
Similarly, technological innovation and the drive towards automation will help keep borrowers informed.
At LMS, for example, we launched the “TrackMyCase” app, to help borrowers follow the progress of their cases 24/7. Our unique STARS (Servicer Tracking & Reporting System) technology manages transactions on-line to ensure speed, cost efficiency, and quality of service.
The industry will need to continue to improve and adapt, investing in technology to make processes faster, easier and help protect against risk. That is why technical innovations is as the heart of our strategy for 2018.
Regulatory change will also drive disruption.
GDPR, PSD2 and open banking have the potential to create real change and opportunities by opening up data.
How this will be embraced remains to be seen. But advancements in AI are already offering a tantalising glimpse of the power of combining the customer data and new technology to drive the customer journeys forward.
Technological development needs to be a collaborative process though – a collective endeavour.
Brokers, lenders, and property lawyers will need to work together to improve systems. The drive for technology improvement will only take us so far if we try to act in isolation.
Red tape and policy can, for instance, prevent technology from speeding up the service. That is why we need to work collectively on refining processes, legal instructions, and communications between interested parties – and support this with technology.