Taking Stock: Crackers to make 2013 go with a bang
I’m becoming increasingly cheerful about the end of 2012 and the start to 2013.
I’ve even put forward an attention-grabbing headline for the consideration of the Mortgage Strategy production team - never mind “A partridge in a pear tree”, sing this instead to the same tune, “An increased intermediary share”!
No? Anyway, this year will turn out between £135bn and £142bn depending on who you believe and how much remortgaging has been done in the last quarter.
As Countrywide operates a mainly estate agency-driven distribution model it is sometimes difficult to see the extent of remortgages so let’s keep the outturn flexible for now.
The mix in 2012 will reflect an increasing marketshare for the direct channel with Santander showing the biggest decline in intermediary support.
That is not in doubt. If you then add HSBC’s consistently strong product offering to the direct channel then it is certain that a direct distribution strategy will have paid dividends this year. All other lenders in that market have fed their branch networks.
So taking all these factors into consideration, when the final figures are in for 2012 I expect to see a 5-10 per cent reduction in gross lending via the intermediary sector.
But oI think that’s all going to change in 2013. I’ve not met a single lender yet who doesn’t think that gross mortgage lending next year will be around the £145bn mark.
They all want to lend more than they did in 2012. This includes the aforementioned Spanish supporters who we would all be pleased to see a return back to 2011 levels.
Why is this so important? Well, simply put I’d expect almost all of the increases to be driven by intermediaries.
That’s an extra £7bn into the broker channel in 2013 with a 0.35 per cent proc fee, which equates to some £24.5m additional revenue into the broker market.
So I say to you all – if you manage to keep your cost base flat in 2013 you will make an extra 10 per cent profit on what you are currently earning.
This bit is essential - will you really be that busy that you need more staff?
It will be easy to waste the profit earning opportunity and just add another support member, another broker and dilute your profit pool potential. Speaking for my business, we are not at that stage and will look at greater efficiency gains first.
So where, and specifically from whom, will this additional lending come from? Here are my Christmas crackers then - I think Virgin Money will lend more in 2013 – without a doubt. I’m confident Santander will help us more in 2013, as will Nationwide.
I believe Lloyds Banking Group will get back to at least 2011 levels of lending in 2013 and look out for BM Solutions in the buy-to-let market in 2013 too.
Coventry, Yorkshire and Leeds will do more next year while Barclays will be innovative and lend at least as much as 2012. I also think HSBC won’t be able to move the direct dial too much further in 2013. I’m uncertain about RBS – their mix does move around a little but I think they will also support us.
So here is my prediction - brokers will definitely do more than £75bn of lending in 2013.
What could stop us? The Eurozone still looks Captain Suicide and the Bank Of England will look closely at the capital issues in our banks and building societies.
I strongly believe that Funding for Lending Scheme has changed things and I’m confident that these downside risks won’t impact on our market in 2013. I am a little nervous writing that but I do think the scheme makes things better for lenders and net increases in lending gets the cheaper funding.
What is also very exciting for old anoraks like me is that we are starting to see some of these lenders miss their application targets and think about the risk curve. If they don’t hit their targets they will need to lend more and play the criteria game.
There just isn’t enough 60 per cent LTV remortgage borrowers to go around for everyone.
So in the past four weeks we have Santander look again sensibly at interest-only, unlike some others.
Precise Mortgages has moved its buy-to-let applicant income criteria, Halifax has looked again at new build LTVs – a significant and important move - while Santander has looked at its applicant score.
Whisper it carefully but I’ve also spoken to two lenders about 95 per cent LTV lending at a sensible price at some stage in 2013.
These will all grow the cake. Remember the issue isn’t about demand - it is about ensuring people can access products to satisfy that demand. This is all encouraging.
None of these moves look likely to fall foul of the FSA sticking its nose into product design - do we really need a regulator to do that? - as it would be a considered and tempered reaction to growing confidence about the housing market.
Remember this is the first time post World War 2 that 95 per cent lending hasn’t remained available – hardly breaking the mould here are we?
It would appear that more informed people than I agree with me. Take the Association of Mortgage Intermediaries’ chief executive Robert Sinclair, another person who has had an excellent 2012, who along with the rest of colleagues in Ami recently outlined that brokers are back – best believe them then.
The only damp squib on the horizon is that I thought this would happen exactly 12 months ago. I was let down by the Euro crisis and some lenders speaking to me with forked tongues. This meant that I was getting to a similar level of frenzy only to be let down in February when prices rose around 0.5 per cent and criteria in the first three trading quarters of 2012 became even harder and more difficult.
Our time from offer to completion went out two weeks and it was hellish to get offers over the line.
So my suggestion is, if you prone to making similar pronouncement’s to Dad’s Army character Private James Frazer that “we’re doomed, doomed” – you know who you are – then you have until February 2013 to indulge yourself before we finally get the confirmation that any improvement has been made.
My own opinion is that the Funding for Lending Scheme changes the ground rules and means that there will be enough funding pricing benefit to lenders for net lending and that will increase liquidity in the marketplace. This is the key difference between now and then.
I‘m looking forward, and expecting, a good strong pipeline going into 2013 and a better time ahead. I even have two lovely lenders who are predicting £150-155bn so it may be more than £24m reasons to be cheerful and if that isn’t enough to go out on and get ourselves some festive cheer then I don’t know what is.