As another challenging year for the broker community draws to a close, intermediaries would be forgiven for hoping that 2011 will see an improvement in the market.
A fragile economy, house price volatility, scarcity of products – especially at high LTVs – and uncertainty around rates are issues that have dominated the market in 2010.
And early indications are that they will not subside in the next 12 months.
In fact, there are several factors that could lead to further uncertainty. But we do not believe that these should be a cause for pessimism.
Challenging circumstances give mortgage professionals an opportunity to demonstrate the value of their expertise by helping consumers choose the right product to meet their needs despite the uncertainty.
So what are the issues likely to be significant in the market in the next 12 months?
The full impact of the government’s cost-cutting programme spelt out in its Comprehensive Spending Review is likely to begin to be felt through job losses across the country.
This will be significant in keeping house prices uncertain and will leave lenders reluctant to pay out for high LTV loans.
Any rise in house prices is likely to be modest at best and many commentators are already suggesting there will be falls.
The Mortgage Market Review will clearly have an impact although that could be less then many in the market are expecting.
The industry should help consumers understand brokers will be there to help them choose the right product
The MMR was instigated in a different environment and the political will is now less about bank bashing and more about reconstruction to get lending going again.
There could yet be moves to water down some of the changes to prevent curtailing lending.
Lenders are likely to be restrained by a number of funding issues. According to some estimates, banks must repay around £800bn of funding over the next two years under the Special Liquidity Scheme, the credit guarantee scheme and term deposits, bonds and securitisations that also need refinancing.
Then there are new rules requiring lenders to increase the amount of capital they must hold under Basel III to better protect the market against future crises.
The combination of the above means the industry is unlikely to see significant improvements in product availability and that it will be challenging again next year.
In addition, revised rules on the cost of funding are likely to create upward pressure on rates, irrespective of any changes in the Bank of England base rate.
But as mentioned earlier, we believe this uncertainty provides an opportunity for brokers to demonstrate the value of professional mortgage advice to consumers.
This is the area brokers should focus on to ensure consumers understand the benefits of quality advice.
Brokers, distributors and lenders should work together to spell out the advantages and obvious benefits clients can expect from mortgage intermediaries.
The industry should help consumers understand that brokers will be there to ensure they choose the right product despite the macro-economic and market factors that will exist in 2011.