UK Mortgage Market Outlook: Q1 2010
Datamonitor, July 2010, Pages: 30
The cautious recovery in gross lending in the latter part of 2009 has not been sustained in 2010. One-off factors such as the end of the stamp duty holiday and the general election have combined with longer-term issues such as restricted funding and lack of demand for remortgaging to depress lending.
Scope
- Provides an evaluation of the market and industry trends up to Q1 2010.
- Analyses the influence of factors such as interest rates, funding issues and property prices upon the mortgage market.
- Sets out The latest gross lending forecasts for the period 2010-2014.
Highlights of this title
UK gross lending in Q1 2010 amounted to only £30 billion, lower even than in Q1 2009 and 64% below the level seen in Q1 2007.
Despite the difficult conditions, some lenders have started to bring new products to market, such as hybrid fixed/variable rate mortgages and high loan-to-value mortgages at more competitive rates than were previously available.
Wholesale funding continues to gradually ease, with a handful of new issues of residential mortgage-backed securities. Improving conditions have led some specialist lenders to re-enter the market, particularly in the buy-to-let sector.
Key reasons to purchase this title
- Understand the key issues that will drive the mortgage market in 2010 and beyond.
- Assess the prospects for an increase in lending activity over the next few years.
- Use The forecasts to help inform your future plans.
CATALYST
SUMMARY
ANALYSIS
The mortgage market got off to a slow start in 2010
Gross lending in Q1 2010 was even lower than in Q1 2009
One-off factors reduced activity in the mortgage market in early 2010
Low levels of lending have persisted into the spring
Low rates of remortgaging continue to hold back total gross lending
Signs have emerged that the recovery in house prices may be coming to an end
Uncertainty over the future direction of house prices may start to affect the supply of credit
The supply of mortgage finance remains severely restricted
High loan-to-value mortgages continue to improve in availability
High LTV mortgages are still very costly
More products are starting to become available at higher LTVs
Lower LTV mortgages are becoming steadily cheaper
Lower rates could help to revive remortgaging activity
The market will be pulled in different directions by opposing forces in the coming months
A handful of providers are starting to innovate once again
HSBC is marketing a hybrid fixed/variable rate mortgage
Barclays now offers a high LTV mortgage to applicants buying a property from Bovis Homes
Wholesale funding conditions are gradually improving
Specialist buy-to-let lenders are looking to re-enter the market
Non-mainstream borrowers are struggling to obtain finance
Restrictions on interest-only mortgages could affect first-time buyers
A persistently low base rate is forcing even some larger lenders to raise their SVRs
There is uncertainty as to how soon and how quickly the base rate will rise
The Bank of England is not anticipating a significant rise in the base rate in the near future
The Organisation for Economic Co-operation and Development is calling for a more rapid rise in rates
The newly elected government has started to reduce public spending and raise taxes
The 2010 emergency budget marks the start of the fiscal squeeze
Other government measures could stimulate the market to a small degree
Datamonitor forecasts a sluggish mortgage market over the next few years
Gross lending is expected to reach £260 billion in 2014
The optimistic scenario assumes gross lending will rise to £300 billion in 2014
Gross lending will reach £220 billion in 2014 under the pessimistic scenario
APPENDIX
Supplementary data
Definitions
Bank of England base rate
CAGR
Gross advances
Remortgaging
Methodology
Further reading
Ask the analyst
Datamonitor consulting
Disclaimer
List of Tables
Table 1: Forecast gross advances under the Datamonitor view (£m), 2010-14f
Table 2: Forecast gross advances under the optimistic view (£m), 2010-14f
Table 3: Forecast gross advances under the pessimistic view (£m), 2010-14f
Table 4: UK gross lending in first quarter (£m), 2005-10
Table 5: UK gross annual lending (£m), January 2007-April 2010
Table 6: Gross lending by product line (£m), January 2007-April 2010
Table 7: Monthly and annual changes in house prices (%), January 2007-May 2010
Table 8: Net balance of lenders reporting that an increase in house prices is boosting credit availability (%), 2007-10
Table 9: Net balance reporting an improvement in credit availability and lending criteria (%), 2007-10
Table 10: Net balance of lenders reporting an increase in mortgage availability (%), 2008-10
Table 11: Interest rates on fixed-rate mortgages (%), January 2007-May 2010
List of Figures
Figure 1: Gross lending remained subdued at the start of 2010
Figure 2: Gross lending to date in 2010 has failed to improve on the levels seen in 2009
Figure 3: Remortgaging has stagnated since the end of 2008
Figure 4: The rate at which house prices are rising is slowing down
Figure 5: Doubt over house prices is starting to have an adverse impact on the supply of mortgages
Figure 6: Mortgage credit availability has failed to improve in the early part of 2010
Figure 7: The availability of high LTV mortgages is continuing to improve
Figure 8: Rates on high LTV and low LTV products continue to diverge
Figure 9: HSBC now offers a hybrid fixed/variable rate mortgage
Figure 10: Gross lending will reach £260 billion in 2014 in Datamonitor's view
Figure 11: In the optimistic scenario, gross lending will hit £300 billion in 2014
Figure 12: Gross lending will rise to £220 billion in the pessimistic scenario
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