It has tended to feel like the year took quite a while to get going
David Gilman is partner in charge of Blacks Connect
We have reached that somewhat bizarre time of the year when there appears to be more consideration about what is to come, rather than what is currently happening. Over the next few weeks we will see a raft of columns and articles which include a variety of predictions about what 2016 will bring for the housing and mortgage markets; this when 2015 still has a few months to run even if one of those is December which tends to be slower (for obvious reasons).
However, this year the run-down to December 31st seems incredibly important for any number of reasons both specifically for the mortgage market but also in a wider sense in terms of regulatory changes, economic measures, rate decisions and political ramifications.
Certainly, since the start of September the mortgage market appears to have been in a very ‘serious’ mode perhaps brought about by the fact many lenders might be well down on their 2015 targets and will want to make up some of that shortfall.
Indeed, after a year in which the regulatory impact on the mortgage market has continued to loom large – particularly in terms of lenders’ ongoing responses to MMR but now increasingly with preparations for the Mortgage Credit Directive (MCD) – it seems that the concentration might well not have been fully on business activity. With other notable distractions such as the General Election also having a considerable impact, it has tended to feel like the year took quite a while to get going.
The upshot of this is that post-Summer mortgage lenders’ minds have certainly been concentrated by what has gone before and how 2015 could be ended on a high. Thus we have seen some continued heavy competition, particularly in the lower LTV mortgage market, with prices being repeatedly cut, plus we have a lending community which seems much more at ease with itself and willing to countenance lending and criteria changes that it certainly would not have in 2014.
Clearly, there has been a lot of talk this year about under-served borrowers and not just the ‘traditional’ ones that tend to fit into this category, like first-time buyers. Nowadays, this is just as likely to mean ‘older borrowers’, or those who have had a little bit of adverse credit in the past, or those wanting to purchase new-builds, and especially those who are coming to the end of their interest-only mortgage term with no discernible way of paying off the capital.
Perhaps it is the interest-only debate which is the best evidence of this change in lender mindset that has been apparent in recent weeks.
There are certainly many who felt the nail was firmly in the interest-only mortgage coffin and there would be no resurrection to speak of. However, that’s simply not the case and the principal reason for this is that interest-only mortgages are genuinely suitable for some (but clearly not all) borrowers.
It appears that lenders are willing to accept this and we have had a number making their re-entry into this part of the market in recent weeks and I expect more to follow.
In the key area of lending to older borrowers as well, we are seeing activity, movement and a certain amount of innovation as there appears to be an acceptance that this problem won’t be going away anytime soon and lenders need to come up with product solutions.
Added to this, one would hope is a more common sense appraisal of who actually is an ‘older borrower’ – certainly not someone in their early 40s who might be looking for a 25-year term but those much older who will have a mortgage moving into retirement and can continue to pay this through retirement income.
Overall, it appears that we are entering something of a ‘common sense’ period whereby lenders are looking at cases and borrowers on their merits and the gilding of the underwriting lily is not so prevalent. One would hope that this continues beyond the end of the year and into 2016 and, one thing is certain, the market appears strong for the intermediary sector who can expect to be at its heart for some time to come.