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John Cupis: 2015 will be strong but we need ‘eye catching’ rates to see remortgage boost


The past year seems to have whizzed by at such a speed that I have almost forgotten that the World Cup has been and gone. My sporting predictions that I gave Mortgage Strategy last year have had the usual mixed results but this time I got the financial ones mostly right.

I said that gross lending would end up 10 per cent higher in 2014 than in 2013, and it looks like we will be around 15 per cent up at around the £200bn mark, coupled with no rises in base rates all year.

I also thought that intermediaries would pick up a bigger share of the volume in 2014, and certainly we are heading to around about 65 per cent from a 57 per cent share last year. Not too bad then.

Manchester City won the Premiership as predicted, but a miserable forecast for Brazil to win the World Cup could not have been more wrong.

Like all good economists I like to hedge my bets and will reveal my 2015 forecasts shortly.

There are many reasons to be cheerful next year, alongside some cautionary headwinds to be mindful of.

First, let us remind ourselves that new lenders are coming with some heavyweight contenders joining the ring.  TSB goes live in January with a strong intermediary team and business plan, with HSBC making noises that it too wants to join the wider intermediary market. Pitch this alongside other specialist lenders and existing lenders wanting more I can see some interesting and cheaper pricing for consumers, particularly in the New Year.

Combine new entrants with a continued subdued interest rate outlook, means we might need eye catching pricing to drive remortgaging in the first half.  Anybody taking a variable rate product in the past five years has not seen a base rate change. The last base rate rise was on 5 July 2007 to 5.75 per cent.  Since then customers have only ever seen rates fall.  Incredible times lie ahead – ones which will create history when the first rate rise appears.

The general election is due in the Spring next year.  There is a real risk that a combination of the SNP destroying the Labour vote in Scotland, and UKIP hitting the Conservative vote in England, will deliver one of the most divided votes in the UK Parliament.  Markets do not like uncertainty and this will weigh heavily on them in the first four or five months of next year.

The UK housing market will have a good year in 2015.  Government support for new homes will continue, interest rates are at historical lows and lenders will be keen to lend.  I would identify three areas of growth.  New-build, buy-to-let, and the second charge markets. 

New-build will follow the builders plans for site releases and these will be good again in 2015 as builders look to replenish stock which sold out in the first half of 2014. 

Average incomes are still rising slowly and affordability will continue to confine some people to the rental market, particularly in the South East where demand continues to outstrip supply.

The second charge market will slot into MCOB in 2016, but is an interesting product to preserve the benefits of customers not wishing to disturb their first charge loan on low base rate trackers, interest only, impaired credit for example.

So when you boil all this and other factors down, I am predicting for 2015:

  • Gross lending up 7 per cent in 2015 on 2014.
  • Interest rates to remain flat all year.
  • A hung Parliament and second coalition Government.
  • £1 to buy 1.3 euros at some point in the year.
  • Chelsea to win the Premiership.

I wish you all a very Happy Christmas and good luck in 2015!



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