After an incredible year that will see gross mortgage lending likely to finish at £170bn, up 15 per cent on 2012, we should recognise key changes to come and plan for them
It is a rare opportunity for me to bask in glory as a year ago I correctly predicted that Manchester United would win the 2013 Premiership title, Sir Alex Ferguson would retire, and that Andy Murray would win Wimbledon.
My economic forecasts were mostly right too but like many of us, I didn’t predict that gross lending would exceed even the most optimistic of forecasts.
We are likely to finish this year at around £170bn which is more than 15 per cent up on 2012 and is also ahead of my forecast in November of £147bn. I should stick to football!
It has been an incredible year and we have witnessed a real change in pace in mortgage activity, an increase in mortgage enquiries, more people wanting to move home, more refinancing of existing arrangements, more builders building, and even more lenders coming to market.
We should recognise the key changes coming our way and plan for them.
The Mortgage Market Review comes into force on 26 April 2014 and while this will bring relatively few changes for advisers, it is important to stay in touch with your network or compliance support service to ensure a smooth transition.
While the Government’s Funding for Lending Scheme for mortgage lending will end from the beginning of 2014, Help to Buy will continue throughout the year.
These have been good schemes for stimulating demand for mortgages in general and Help to Buy provides confidence to builders that mortgage finance is supplied for new home purchases. What is unclear is whether Help to Buy will overcook house prices next year.
I think this will receive constant media and Bank of England scrutiny, with many sides arguing for and against its modification.
Expect to see this debate starting to rage in the second half of next year as the monthly house price indices start to tell a rising story throughout the year.
Bank of England governor Mark Carney has said he will take a look in September so let’s see how this develops.
There are also emerging risks on the interest rate front, with the Bank of England sounding cautionary notes regarding the increased chance of a base rate rise in 2014.
From next year, the Funding for Lending Scheme will focus on business lending. While this has had beneficial effects for residential housing, the benefits for small businesses are still mixed, and as small businesses are the engine of entrepreneurship and employment, a rate rise too early won’t help a growing economy ahead of the general election in 2015.
The overall economic picture is always about domestic vs. international policy and progress. The old saying goes “when the US sneezes, the UK catches a cold”. Events abroad tend to have a much bigger impact on our overall economy. The US is in good shape going into the next few years as they emerge from recession so I hope we will catch some of that healthy activity rather than the credit ills of recent years. Europe however is in debt-laden confusion, and the UK is still dependent on both the US and Europe for economic prosperity.
So it is a tricky balance as always.
For all these reasons I see a generally positive year next year, with just some caution on house prices and interest rates which could spoil the party:
- Gross mortgage lending a maximum of 10 per cent up on the closing 2013 balance. The important factor for intermediaries is whether the current split of lender/intermediary will shift towards the intermediary next year. I think it will, so the actual amount of gross lending is less relevant when judged against the split.
- Interest rates will stay flat for one more year, but will come under pressure if house prices start rising quickly.
- On sporting predictions this year’s Premiership will be a close affair. I forever dream this will be the year for Tottenham but it may fall to a Manchester club once again. My only solid prediction on football is that Brazil will pick up the World Cup in Rio.
As 2013 draws to a close I would like to wish PMS executive chairman John Malone a very well deserved retirement. A mortgage market inspiration over many years, he is hanging up his boots and I am sure you will want to join me in extending my very best wishes.
Thank you all for your support in 2013 and I hope we can help you further in what will no doubt be a very positive 2014.