Will the tailwinds outdo the headwinds in 2016?
As we kick off a new year, it is slightly unusual to consider that the UK mortgage market is probably facing into several headwinds. I will cover this later in my article, but what I should state now is optimism reigns supreme and, of course all the predicted growth is from the intermediary channel.
When I talked to our lender partners over Christmas, it was generally accepted that the 2015 gross market would finish around the £210bn mark – perhaps slightly higher – and there wasn’t much variation. The Council of Mortgage Lenders’ official figures put this slightly higher at £220.3bn for the whole of 2015.
However, what was interesting was the range in views on what the 2016 market would look like. The most bearish predicted a very cautious £215bn and, at the other end of the spectrum, one large lender forecasted £245bn.
Now, a £30bn bandwidth is considerable in any year, but it just shows that there is a lot of uncertainty about what lies ahead. Of course, those veering towards £240bn and above are doing so because they predict a rate rise and the corresponding race to remortgage that comes with it. But after 83 months at 0.5 per cent it would take the skill and wisdom of Asterix and the Soothsayer to predict the exact month of the next rise.
Indeed, as we start another year, it looks increasingly likely that those consumers sitting blissfully unaware on SVR are going to continue to do the same unless brokers can persuade them to switch.
So, back to the headwinds – and there are a few.
Firstly, the Mortgage Credit Directive is around the corner. While your average customer will have absolutely no idea what this is, it will take some getting used to, though hopefully it will not slow things down too much.
Secondly, much has been written about the Chancellor’s actions on buy-to-let. While the exact consequences are yet to unfold, it is safe to assume that landlord activity is going to be impacted, especially for those considering let–to-buy or a one off investment as part of an overall financial plan.
Thirdly, general lack of stock and housing supply. It is one thing to try to move the dial on home ownership versus rental, but it is quite another to get Britain building. While there is much to be said for bold plans over the next five years, the fact remains that we simply do not have enough SME house builders out there ready and able to fill the gap left by the major house builders.
Fourthly, the sobering statistic from Halifax earlier this month that price to income multiples are sitting at 5.5 times, the highest level since 2008.
And finally, there is the unknown surrounding the ‘In / Out’ Referendum. This will continue, of course, until we actually have the result, so this is one of those issues which is difficult to control but will have an impact of some sort.
Despite the headwinds the sector is facing, people will continue to want to own a home – with a mortgage or without – and as a sector we are hugely resilient.
Gross lending will increase. Consumers are turning more and more to brokers for advice and people want to buy homes. Add to the equation that mortgage rates remain incredibly, so many people will be getting the deal of their lives.
So will the tailwinds outdo the headwinds and lead us to growth in excess of 10 per cent? Let’s see.
Peter Curran is managing director, financial services, at Countrywide