Your Views

Robust remo levels are cause for optimism after a tough year…

Figures from the Council of Mortgage Lenders showed gross remortgaging had risen to £6.1bn in October – the highest monthly figure since January 2009.

This data backs up the findings of Imla’s Q3 2016 Mortgage Market Tracker, which showed that remortgage enquiries had jumped from an average of 38 per broker in Q2 to 48 per broker in Q3. The proportions of remortgage applications resulting in offers, and subsequently in completions, also rose, to 80 per cent and 83 per cent respectively.

The continued strength of the remortgage market was foreseen by several commentators. In Imla’s intermediary lending outlook last year, 59 per cent of members predicted that the remortgage market had the biggest potential for growth, and so it has proved. More broadly, and despite significant uncertainty, the mortgage market as a whole has been more resilient than expected.

Our tracker clearly demonstrates the strength of the market; by almost every measure the numbers have remained stable despite broader economic ambiguity. The average number of enquiries, for example, rose from 44 to 46 per broker in Q3. Granted, this is a modest increase across a single quarter. But when one considers the context (Q2 being before the EU referendum and Q3 being post Brexit), it is cause for encouragement.

Industry confidence also remains strong. The tracker found that 98 per cent of intermediaries were confident about their sector going into 2017, rising to 100 per cent when asked about the prospects for their own business. Considering we are still in the dark on the exact form Brexit will take, these figures show the market is in a strong position.

There is no denying that 2016 was a testing year for the housing and mortgage markets. First came George Osborne’s changes to stamp duty, shortly followed by the shock Brexit vote. Post-Brexit predictions were gloomy, and yet, as the Q3 data shows, the market has proved itself remarkably robust.

An earthquake was expected, but we are yet to experience anything more than the slightest of tremors.

Peter Williams
Intermediary Mortgage Lenders Association

…and PRS will keep growing in 2017, albeit more slowly

As we enter 2017, some key milestones already loom on the horizon. The triggering of Article 50, changes to mortgage interest tax relief and the new PRA underwriting standards will all add to the uncertainty that has characterised the past year. But the market is well equipped to respond and, more importantly, has the will to do so.

The changes will, however, have an impact on rents. The new stamp duty levy, the removal of mortgage interest tax relief and the ban on letting fees all have the potential to drive up running costs for landlords and many will choose to pass on the costs to tenants. Altogether we predict rental growth will accelerate to at least 3 per cent by the end of 2017, slightly ahead of the forecast rate of inflation.

On top of this, with the prospect of real incomes falling next year as inflation kicks in, first-time buyer affordability will become even more stretched, leaving the PRS to pick up the demand for housing.

Housing policy must be supported by sustainable, sensible lending – a worthy PRA goal. However, the cumulative effect of the political and regulatory changes could bring a greater level of market dampening than was intended. Any move that slows the widening of supply poses a risk to the long-term improvement of the housing market.

We estimate that the PRS will continue to expand, albeit more slowly, with growth in the number of rented households moderating to 5.2 per cent in 2017, taking the total to 5.6 million. Coupled with gentler house-price growth over the next year, we forecast that the sector’s value will rise to £1.4tn.

John Eastgate
OneSavings Bank