Tracie Pearce (pictured) is head of mortgages at HSBC
As we raise a toast and bid farewell to 2017, your mortgage glass will either be half full or half empty, depending on your perspective.
If you are a grounded optimist – like me – then you will be going into 2018 full of positivity and expectation for the forthcoming year.
Mortgage brokers have much cause for celebration when looking back on the past 12 months.
The final quarter offered a boost to the remortgage market with the first hike in the Bank of England base rate for a decade.
We also continued to see further digitalisation of the mortgage process across the market throughout 2017 – something that should help to reduce the administrative burden on brokers and retention procuration fees are now the norm.
However, the buy-to-let market in particular endured a challenging year and over the coming months we may start to see the unwinding of some landlords’ portfolios.
The full impact of the buy-to-let tax changes will start to be felt across the industry during 2018/19 as landlords file their tax returns and look ahead to what impact they will have on future earnings.
As a result we are likely to see more properties come to market as landlords adjust their portfolio size to fit more comfortably within their appetite and the taxation wrappers available.
While this may be beneficial for the residential market, it is likely to be offset by an increase in rents, as landlords look to recoup any losses on their remaining properties. The residential market may be the lifeblood of the mortgage market but the buy-to-let sector is essential for the overall strength of the housing sector and as such, it is vital it remains in good health.
One avenue that could help brokers fill the void left by buy-to-let lending is interest-only lending to those in retirement – an area the Financial Conduct Authority consulted on in 2017.
This will be one to watch in earnest as we enter 2018 and work together as an industry to help solve this real customer need. One point the market has learned over the last 10 years is that diversity coupled with a little bit of caution is paramount for firms’ longevity.
I would expect brokers’ market share to grow a little next year. The potential for further base rate rises during 2018 could see transactions increase and as a result the market should prepare to pick up the capacity.
It will be interesting to see if more lenders move towards giving borrowers the option of instructing their own solicitor, to ease pressure on conveyancing firms.
The strength and resilience of the housing market is likely to be tested in a rising base rate environment. Added to this will be the possibility of rising inflation in combination with fairly low wage inflation.
The rise in base rate however does give the BoE the option of a reduction in the future, should we find the Brexit ride bumpier than expected.
Regardless of Brexit developments, lenders will be busy preparing for the introduction of the European Standardised Information Sheet this year, which will need to be implemented by March 2019 and replace the Key Facts Illustration.
Unlike the Mortgage Market Review, these changes aren’t deeply invasive but will require some technical development which will need to be addressed to minimise disruption.
The move towards digitalisation is set to continue apace in 2018. Open Banking, in time, may serve to reduce the administrative burden for brokers; allowing them to spend more time advising their clients; while GDPR could help to speed up the process as the transfer of data between organisations becomes streamlined.
We are in the process of rolling out our new broker platform and HSBC looks forward to working with our intermediary partners throughout the year.
Brokers will still remain at the forefront of the advice process in the digital age but customers will also look for other options alongside face-to-face advice.
Research from the Council of Mortgage Lenders – now part of UK Finance – shows four in 10 customers want a blend of digital channels and others in which they can deal face-to-face with a colleague, while two-thirds would prefer to speak to an adviser about complex financial needs.
Just four in 10 customers believe that “robo advice” will be faster and more convenient than talking to an adviser.
The mortgage sector has made great strides in its digitalisation and perhaps 2018 will be the year the legal sector starts to think about its own modernisation.
As an industry we still find that no matter how quickly we get mortgage offers out to our customers we are waiting for the legal practices to do their checks and balances.
If we are able to get same day mortgage offers out to a client -, is now the time for the industry starts to question what we can do to speed up and modernise the legal element?
HSBC will look back at 2017 as the year we cemented our position in the intermediary market.
As we finish the year, around 71% of the intermediary market has access to our products and we look forward to more continued expansion in 2018.