The political climate in 2019 put the mortgage sector through a stress test of its own.
Kate Davies (pictured) is executive director at IMLA
The political climate in 2019 put the mortgage sector through a stress test of its own. Brexit uncertainty and a General Election have challenged confidence in the market, yet despite these threats the sector has largely remained resilient.
Last year may have seen a slight softening in gross mortgage lending, but intermediaries have continued to buck the trend. Advisers have continued to grow their market share to 76.6%, and IMLA research suggests their confidence reached a peak in Q4.
Looking ahead, the success of the market in 2020 could be influenced by the upcoming Budget, the willingness of the new Housing Minister to get stuck in and other key factors including the phasing out of the current Help to Buy scheme.
IMLA’s report, The new ‘normal’ – prospects for 2020 and 2021 has suggested the market will remain robust over the next two years. In previous years, we’ve seen activity dominated by factors like remortgaging, but the lending composition in 2020 may be quite different.
There are key growth areas, such as lending on new build, but other aspects of the market could see a decline. For example, we’re anticipating that gross buy-to-let lending will fall this year, with a growing number of landlords exiting the market due to the government’s changes to mortgage interest tax relief.
Remortgaging will also likely remain flat in 2020, stemming from older borrowers paying off existing mortgages, the growth in popularity of longer-term fixed rate products, and the continued rise of product transfers.
The end of the government’s Help to Buy scheme is fast approaching. This could have an impact on the business mix for advisers this year as well.
Although the new restrictions are due to be implemented in 2021, housebuilders offering the scheme on developments must have reached practical completion by the end of 2020.
Advisers must be having clear conversations with clients about how the changes might affect their plans to step onto the housing ladder, particularly if they are planning to purchase a property later in the year.
Customers need to be guided through their options around whether they should move ahead under the current scheme or whether they should consider other properties.
Developers and lenders need to prioritise conversations with prospective homeowners to ensure an orderly close-out of the scheme, meanwhile government must focus on its strategy for delivering high quality housing across all tenures and at the volume needed.
The FCA’s recent changes to execution-only channels have also made clear its intention to create a place for non-advised mortgage sales and it’s crucial that the intermediary sector plays its part in educating consumers about their options.
Some consumers, particularly those with straightforward financial and personal circumstances, may be well-placed to make their own decisions about suitable mortgage products unaided. However, there will continue to be many who need and will appreciate the professional and independent advice which mortgage advisers can offer.
The outlook for the mortgage market in 2020 is largely positive and although there are some significant hurdles ahead, the fact that the sector has proved its resilience in recent years should give us confidence. With each year the mortgage market continues to evolve, becoming more complex as individual borrowers’ circumstances change and adapt to different work patterns and family structures.
The intermediary sector should take comfort in the indicators showing that the market can adapt to changes in regulation and maximise the opportunities of changing consumer needs.