Average expected increase in business over the next 3 months (%)

looking at increasing their portfolio. And house price inflation would have to sink to well below 4% to trigger any sort of concern about investment returns.”

Jenks does have concerns about the self-cert market, however, saying the market is being continually narrowed. Of all the specialist sectors distributors depend upon, it is the one HBOS is most concerned about as a lender. “We have brands within HBOS that are doing non-income verification products when, really, they should be self-cert cases and I would suggest as an industry that packagers have got to watch out for that,” he says.

Of all the markets, the prime market is one that HBOS sees showing little or no growth. The lender says the reason forthis is continuing affordability constraints that mean first-time buyers are becoming increasingly unable access prime products.

Jenks says although there has been some product innovation that is likely to create opportunities for first-time buyers, HBOS does not believe there has been enough innovation to create growth this year. He adds that if distributors want to become involved in the prime market and can work with lenders on product innovation and create better products they may eventually see some growth in their prime business.

But he warns there will have to be enough value for the lender as well. “The other thing is lenders’ retention strategies are going to eat away at the remortgage market and whether packagers like it or not the reality is we have to be able to broadly predict the average life of loans and, therefore, lenders will either work with intermediaries and packagers on retention or will do it on their own. It is primarily a mainstream issue but it will roll out into the specialist markets,” he adds.

Overall, Jenks says, while the mortgage market saw significant growth in 2006, gross lending will not reach the same levels over the next five years. HBOS believes gross lending is likely to average £330bn during this period. Jenks says the pressure on inter