While perhaps not as eagerly anticipated as the John Lewis Christmas advert, it is always interesting to read the latest Mortgage Market Forecasts issued by UK Finance at this time every year.
I would think it is something of a challenge to make sense of what has actually happened this year, let alone to try and extrapolate out what might occur over the next two years, but fair play to UK Finance for taking this on.
It has been, at times, a real rollercoaster ride but – perhaps somewhat ironically – we are perhaps left with a market now that begins to look more like a pre-pandemic ‘normal’ one, rather than an outlier.
UK Finance’s headline numbers are that it anticipates 2022 will come in at 1.27 million property transactions, gross lending of £322bn, and net lending of £72bn.
Compared to last year that is transactions down by about 200,000, gross lending up by £12bn and net lending just slightly down from £73bn.
Of course, 2021 benefited from a stamp duty holiday for three-quarters of it, and there has been a drop off in purchase lending, but this was more than made up for by a fairly significant increase in both homeowner and buy-to-let remortgaging.
So, what of the next two years then? Perhaps unsurprisingly, it is expecting transaction numbers to fall year-on year, down to just over 1 million in 2023 and slightly below the 1 million mark in 2024.
Following a similar trend is both gross and net lending. For the former UK Finance anticipates it falling to £275bn next year and £253bn the year after, with the latter hitting £41bn next year and £38bn in 2024.
Again, perhaps not unsurprisingly, much of this fall is being put down to less purchase lending, although it anticipates remortgage business will hold up well, and to hit even greater heights for homeowners next year than this.
If last year was being touted as the ‘year of the remortgage’ before it had even got going, then 2023 has to be viewed as the ‘year of the remortgage’ super-sized. Because not only is it anticipating an increase in homeowner remortgaging but a significant increase in product transfer (PT) business.
To think that up until 2019 we had no market-wide figures for PT activity – a part of the market which according to UK Finance has increased from £168bn in that year to an anticipated £197bn in 2022.
Plus, it believes this part of the market will not stop here, predicting it will be £212bn in 2023 before dropping back to £193bn in 2024.
To say this is a huge amount of business for intermediaries to try and secure is an understatement, and UK Finance puts this down to existing borrowers – particularly those on lower incomes – benefiting from a PT offer which of course does not come with an affordability assessment, allowing them to remortgage at the end of their deal.
This will be particularly valuable to existing borrowers who have fixed-rate deals coming to an end in 2023 – of which UK Finance expects to see an increase.
Intermediaries have upped their share of the PT market in recent years – perhaps as a result of more information being available on just how big and valuable it is – and it is clearly going to increase in importance, as will the need to get in front of clients to ensure they are fully aware of all their options, not just the PT put in front of them by their existing lender.
To be fair to UK Finance, it appears to have put this front and centre of its recent communications. I was particularly pleased to read the UK Finance press release on these figures, which gave an explicit ‘instruction’ to all mortgage customers ‘to speak to a whole of market mortgage adviser to discuss the options best suited to their circumstances.
Let’s be honest here, there would have been times in the most recent past when the major trade body for lenders would have steered clear of such an intermediary-friendly message, based on the fact many of its most prominent members were perhaps more committed to direct business.
But, the numbers do not lie in our space, and the vast majority of lenders will be receiving the vast majority of business via advisers. Not forgetting of course, the impact of the forthcoming Consumer Duty measures and the need for lenders to ensure their customers are securing positive outcomes.
In a marketplace which is predicted to be relying heavily on remortgage and PT business next year, and one which is likely to see a lot of rate and criteria changes as lenders compete heavily for business, the importance of advice can’t really be underestimated.
Positively, this puts the ball firmly in advisers’ court in order to secure the business out there – whether advising on a remortgage or a PT. It is an opportunity to be grasped, and I fully expect advisers to grab it with both hands.
Bob Hunt is chief executive of Paradigm Mortgage Services
