Welcome to the Twighlight Zone
Bob Hunt is chief executive of Paradigm Mortgage Services
August is often a month that can feel like the Twilight Zone when it comes to the mortgage market – with the school holidays in full effect and many people’s minds (and bodies) completely elsewhere it is perhaps no wonder.
This year doesn’t feel particularly different but, at the same time, there is certainly a sense that the industry is putting in place all the necessary foundations in order to build for the rest of 2014.
For a month which is often notoriously quiet we have already seen a significant amount of activity particularly in terms of lenders changing and tweaking product propositions and, to my mind, there is no doubting the ‘gearing up’ that is being done for the months ahead.
Despite some of the doom and gloom merchants appearing to dominate proceedings it certainly looks like lenders’ appetite to lend is there and this should hopefully mean we motor towards the end of the year rather than simply pootle along.
The Council of Mortgage Lenders now believes that with the strong start to 2014, and the anticipation of a market pick-up over the course of September through December, gross lending levels will break the £200bn level this year.
This change of prediction follows its forecast for 2014 (offered in December last year) which suggested gross lending would be around the £195bn mark with the number of transactions at 1.14 million – now it is forecasting 1.23 million.
Given the positive shift in channel weightings, i.e. the overall share of lending written by brokers as opposed to bank advisers is increasing – it makes for a very rosy outlook.
Undoubtedly we recently saw the market slip off the levels we experienced in the first four/five months of the year and there are many reasons for this, regulatory, politically and economically. The fact is however that there remains strong underlying demand particularly to purchase homes – we are even seeing a slight uptick in remortgage activity – which coupled with a lending community wanting and willing to lend means that we can see a positive future.
This is also not predicted to end when this year comes to a close – the CML also changed its prediction for next year’s gross mortgage lending figures revising them upwards from £206 to £220 billion, and suggesting transactions will hit 1.15m, rather than 1.1m.
What may worry some is the anticipated drop-off in transaction levels next year but we must all prepare ourselves for the impact a continued tightening of regulation plus a rising Bank Base Rate may have on the overall market.
Having not had to contend with rising rates for over half a decade we are, to some extent, in unchartered territory when it comes to predicting how a rising rate environment will ultimately play out.
One might presume that the remortgage market should see an improvement as those borrowers on tracker or SVR products look to see if they might be better off elsewhere, but there are also major questions to be answered in terms of the impact rising rates will have in terms of arrear levels and ultimately possessions.
There’s also the likelihood of a continued increase in the number of second-charge loans as regulation, competition and understanding of that sector continues to gather momentum.
The point for brokers to take on board is to be prepared but also adaptable when it comes to the changing marketplace.
There is no reason to suggest you won’t be, however make sure you are able to provide advice, services and products to those who might normally not be purchasing or remortgaging.
I’m talking, for instance, of those pensioners next year who might be looking to take advantage of the pension changes and looking to invest some of their pension pots in property, and/or those borrowers who have benefited from record low BBR over the past five/six years but may (next year) be looking to remortgage for the first time in a long time.
It’s our belief that 2014 will end on a high but it is a mug’s game to predict too far into the future and, as we have all seen, we work in a market with a huge number of outside pressures being brought to bear upon it.
Therefore, having that flexibility built into the business and being open to as many product options as possible should help your business make the most of today and the tomorrows to come.