Speaking to The Intermediary, Richard Howells, group managing director for financial services at LSL, reflects on the past six months and lays out the priorities for PRIMIS and opportunities for brokers over the coming year.
What stands out when you reflect on 2024, and look ahead to 2025?
When we look back to the beginning of this year, there was a lot of expectation that interest rates would have fallen far lower and more quickly than they have done.
That said, transaction volumes are likely to settle around the 1.1 million mark – still below the average pre-pandemic annual volume of 1.2 million but nevertheless a solid performance given the slower than expected fall in inflation and the ongoing cost-of-living crisis for many.
The mortgage market is set to do better next year and while we do not necessarily share the bullish views of some when it comes to interest rates over the next twelve months, we do think we will see the Bank of England Base Rate fall to around 4% which will further support positive buyer sentiment.
So while I would not understate the headwinds facing some buyers as Stamp Duty reliefs expire in April next year, our expectation is that transactions will grow back to those pre-pandemic levels of 1.2 million, a 9% increase over 2024 which we anticipate will be supported by lower borrowing costs and improved affordability.
First-time buyers may feel the loss of the relief more acutely than others but rises in pay will encourage many to buy when facing even steeper rises in rents.
Even though an improving affordability picture, driven by lower mortgage rates and robust pay rises, looks likely to fuel price increases and transactions in 2025, higher rates for longer will slow long-term growth.
The inflationary impact of increased Government spending and higher taxes is likely to keep a lid on long-term house price performance.
Of course, the UK home moving market is only part of the picture. According to UK Finance, an estimated 1.8 million fixed rate mortgages are scheduled to mature in 2025, which should presumably open the door for more remortgaging activity the following year.
Now product transfers have proven incredibly important over the last few years as borrowers have elected to avoid the scrutiny of underwriting. But a falling rate environment, better affordability and improved pricing should mean re-mortgaging provides a viable alternative to borrowers who previously might have thought product transfers represented their only option.
What of PRIMIS itself in 2025? What is your vision for the coming year?
We have spent a lot of time shaping our business to support brokers’ growth, defend what they have and support them as many decide to diversify to grow and protect their business.
We have put in place a new team to shape our propositions and an ethos of transparency – both of which, I believe, are incredibly important to everyone’s success.
Brokers will need a lot of support over the coming years, and that means they have to trust us, and that starts with transparency of pricing.
We have made a commitment to not top-slice deals with product providers. What I mean by that is that too often distributors agree a deal with the provider and then take a slice before telling brokers what the share between the distributor and the broker is. We are absolutely clear on this – any remuneration from product providers has to be shared transparently with our broker members.
How will you support brokers in providing a more rounded service in the coming year?
How we support our member firms to become better and more robust businesses is, I believe, down a number of implementations. There is no ‘silver bullet’ for making businesses more robust; rather, it involves a combination of technology, education and training.
With regards to technology, we are on the cusp of announcing a critical new partnership for our members that will put technology in their hands that will inject efficiencies and enhance their ability to do business.
We know that other industries are looking at the UK housing and mortgage market with a view to disrupting the current status quo.
What we have to do is make sure our members are ready to meet that challenge so they can deliver the advice that home buyers and owners rely on to get the right products.
The digital market must not bypass the broker. I believe people want to speak to brokers when they need their advice – not interact with a piece of AI that may or may not understand the nuances of their situation.
We need to deliver digital solutions that inject time back into the advice process. Brokers need access to the right mix of tech to support their businesses.
If we somehow, as an industry, contrive to lose the face to face value of advice to AI powered advice models, brokers’ clients will lose out.
In order to ward off competition it is crucial to enable brokers with the platforms and technology to engage with customers earlier. However, this cannot be another bolt on but a system that delivers pre-sales, sourcing, sales and compliance in one set of data capture.
What are going to be the pathways to PRIMIS’ own growth in 2025?
You will see an increasing amount of acquisition activity in 2025 as companies seek growth and scale and we cannot rule that out for PRIMIS, but equally we know there are many brokers out there who would benefit from the kind of transparent and innovative thinking we are putting into the market.
All of this is in the context of growing regulatory scrutiny. What is your view of the compliance landscape in the coming year?
The burden is real. As a big organisation, we can shoulder that responsibility for many smaller firms, the requirements of compliance are becoming very onerous indeed. It’s an issue we need to address across the industry.
Stephanie Charman was an exceptional appointment for AMI and we will be talking a lot with her over the coming months about how we best can manage the pace and speed of regulatory change and its impact on broker businesses.
