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Brokers can still be optimistic about a challenging year

The CML says the market won’t grow this year but deals for first-time buyers and remortgaging could help

CHARLES HARESNAPE, MANAGING DIRECTOR, ALDERMORE
CHARLES HARESNAPE, MANAGING DIRECTOR, ALDERMORE

A number of recent surveys suggest brokers are feeling more bullish about the year ahead.

For example, Legal & General’s Adviser Confidence Index reveals that 85% of brokers believe business volumes in 2011 will be at least the same or greater than the past three months.

The Paragon Confidence Tracking Index also suggests brokers are optimistic about an upturn in buy-to-let business, with almost half expecting to do higher volumes this year.

Aldermore’s survey shows 41% of brokers believe demand will increase with remortgaging and buy-to-let the most active markets.

These surveys all paint a consistent picture of growing broker confidence.

But the Council of Mortgage Lenders doesn’t provide any grounds for this optimism.

Published just before Christmas, the CML’s latest forecast predicts gross mortgage lending will be static this year at about £135bn, with the total number of property transactions at 860,000 – not dissimilar to the level it’s been for the past three years.

First-time buyers, the lifeblood of the housing sector, continue to decline. The number of those under 30 who can buy without assistance has fallen from 63% five years ago to just 17% now.

The remortgage market could make a dramatic comeback as home owners lock into fixed rate deals

If you look at macroeconomic factors, there is nothing to suggest the CML’s outlook is off-target. If anything, it may be optimistic.

Inflation is higher than expected and the recovery, which started last summer, stalled over the winter months.

At best, the economy can be described as fragile.

Lenders also face big challenges. Banks which borrowed under the Special Liquidity Scheme now have to pay back £130bn of emergency funding at the time they’re trying to rebuild their balance sheets.

Minimum lending targets imposed on the big banks last year are being withdrawn this month. So don’t be surprised if the big six banks that dominate the UK mortgage market become reluctant lenders again.

Apologies for sounding like a prophet of doom, but in reality the market could be even lower than 2010.

I hope the market will pick up, but the realist in me says 2011 is going to be another challenging year and I’m building my business plans on that premise.

But I do believe brokers have some reasons to be optimistic.

For example, the remortgage market could make a dramatic comeback in 2011 as home owners try to lock mortgage repayments into competitive fixed rate deals, before increases in the Bank base rate start to take their toll.

The era of borrowers enjoying the benefits of super-low variable rates may be about to end.

And with first-time buyers struggling to get a foot on the housing ladder, which is helping to the buy-to-let market buoyant, the government has convened an emergency meeting with lenders, house builders and other industry leaders to find a solution.

As a result I suspect more lenders will develop products such as guarantor and parental funding deals for first-time buyers.

It is important niche lenders look to find more product variants that will help the mortgage market.

So although the CML is correct in saying the mortgage market won’t grow this year, I believe there are some reasons optimism.

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