Ten optimistic predictions for 2012

30 December 2011 | By Samuel Dale

1. The Eurozone crisis is resolved

European leaders have shown an astounding capacity not to act in the face of the biggest debt crisis in history. German chancellor Angela Merkel is refusing to issue eurobonds or use the European Central Bank to directly buy Eurozone sovereign debt. A third bailout of Greece is possible next year while Italy’s debt yields remain high and the risk of contagion looms large. Government action to re-assure the markets and ensure the safety of buying European debt is the biggest challenge of the year.

2. Individual registration is introduced

Never has the Financial Services Authority had such goodwill over a piece of regulation as they do with individual registration for brokers. All major players welcome the move towards increased professionalism and accept the cost implications. So it was surprising when the FSA delayed its introduction from this year to either 2012 or 2013. Introducing it as soon as possible would be a welcome move.

3. Tesco launches into mortgages

Despite years of anticipation the supermarket giant has still not launched into the market blaming IT problems. It says it has been stung with service issues on its savings accounts and doesn’t want to make the same mistake with mortgages. Even though it probably won’t use brokers, fresh money and a new proposition will help to re-invigorate the industry.

4. Maybe HSBC will start to use brokers (ok, so this is a massive long shot here, but stranger things have happened!)

Although the bank declares itself perfectly happy with its distribution proposition it remains open to change. The FSA’s proposal to ban non-advised sales and European regulation favouring advice may lead the bank to re-consider. It would be a great boost to the broker market to join forces with the biggest direct-only player to provide advised sales.

5. UK RMBS continue to be a safe haven

In a tumultuous market that deeply doubts the stability of the banking system secured debt is doing well. Government reluctance to become involved in a second round of bailouts is further increasing the doubts over banking. Investors are keen to have some collateral against their debt as nervousness sets in amid the economic uncertainty. UK RMBS have performed reasonably well in the last year and experts predict it will continue. It would maintain property’s status as a stable investment.

6. Interest rates rise

While a Bank of England base rate rise would have a negative impact on repossessions and arrears it would be an absolute boon for brokers and lenders. One large lender said last year that it will bring out the party hats and cake when the rates do rise as it remortgaging will rocket. And while remortgage business is better than 2009 and 2010 it remains low and a rate rise will give it a huge boost. Concerned clients would flock to brokers asking for advice.

7. Direct deals fall and broker business rises

Over the last few years direct deals have been on the rise and brokers’ share of the market has been in modest decline. But the broker market still makes up around half of all mortgages and has proven itself incredibly resilient amid the storm. Numbers have dwindled and only the best remain so it figures that they should be able to grow broker’s share. Furthermore, lenders that have tried to push direct channels are now turning back to brokers. It could be the year when brokers fight back and take market share from the banks.

8. Government builds hundreds of thousands of homes

I know it sounds crazy but stick with me. For decades governments have missed their homebuilding targets and the slow car crash of a housing crisis is now upon us. The current government has scrapped targets altogether claiming it backs local planning decisions. On the positive side the housing strategy released last month gave a boost to building through releasing more land for homes, a mortgage indemnity scheme on new build property and the existing FirstBuy shared equity scheme. The UK desperately needs more homes so here’s hoping the government action can help meet demand and stop house price bubbles and rocketing rents.

9. Clarity over buy-to-let regulation

The speculation over buy-to-let regulation has been ongoing since residential mortgages cam under the FSA’s sphere in 2004. The uncertainty has been unhelpful to lenders investing the sector and badly needs some resolution. The European mortgage directive finally seems to have captured buy-to-let but the U government and FSA is lobbying against the proposal so confusion continues to reign. Some clarity once and for all would be greatly received by the industry so it can move on with or without regulation.

10. More than 1% growth in the UK

In the autumn statement chancellor George Osborne revealed that the Office of Budget Responsibility had downgraded growth for 2012 to 0.9%. The OBR added that there were major downside risks to this assessment in the form of the Eurozone crisis. The government is doing all it can to boost growth without changing its spending plans such as releasing up to £20bn from pension funds for investment in the UK, credit easing and even the MIG. It may seem unlikely now but the Eurozone crisis could have a soft landing, these schemes could help and the OBR may be overly pessimistic. Here’s hoping.

Follow @samuelsdale and @mortgagestrat on Twitter

If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat