The research paper, The Credit Crunch – One Year On, Adapting to a Changing Mortgage Market also predicts that incomes are unlikely to return in the foreseeable future.
The paper says net lending for 2008 will be around £55bn – half the 2007 level – and is not likely to increase in 2009.
AMI believes there will need to be a shakeout and expects significant redundancies across the sector.
The report says: “Some firms will need to close, others merge, as the industry adjusts to a much smaller mortgage market. Developing other income streams will also be key to survival.
“The industry must now adapt to a new world of sustained lower lending volumes and greatly increased muscle from choosier lenders, no longer gasping under the weight of competition for every bit of business they can write.”
It predicts that middle ranking firms are likely to be most vulnerable, while the big networks are highly efficient with the best processes and the strongest relationships with lenders, and many of the small sole traders maintain close relationships with their customers.
“A large number of firms in the middle have been highly transaction focused, buying leads from the internet at low cost and with less focus on maintaining links with those customers while volumes of new business were so plentiful.
AMI thinks lender behaviour is going to change, while marketing departments in tbe past have run many lenders in the fight for market share, now the power will swing back to credit risk managers.
The report says: “Lenders will want a more balanced portfolio approach with a spread of geographical risk, property sectors, and borrower types. This presents an opportunity for mortgage brokers.
“With more borrowers finding their access to finance restricted, they will need the advice a broker can provide. Although we would expect the current very high levels of intermediary usage to drop, we expect the use of brokers to settle at a higher level than the long run average as a result of these changes.”
Chris Cummings, director general of AMI, says: “The impact of the credit crunch is likely to be felt much longer and deeper than was expected 12 months ago. And despite the intervention of the US administration and recent moves by the UK government, the housing and mortgage markets are not likely to recover in the short term.
“AMI is committed to doing all we can to ensure we have a healthy industry. We are currently running a series of workshops around the UK to help members adapt to the new environment and diversify their services. This period will be marked by a “flight to quality”.
“We also require action from government. Sir James Crosby predicted a bleak future for the industry up to 2011 in his interim report on the mortgage finance market. What we now need to see in his final report is a clear set of actions for the UK government which address the capital, not just retail, markets.”