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Direct Mortgages Market Assessment 2006
Key Note Publications Ltd, Jan 2006
The UK mortgage market continues to be extremely competitive. It is providing consumers with cheaper mortgages, increased flexibility and product range, and more choice in how to buy a mortgage.
The market is also broadening, with subprime borrowers now able to choose from a range of large providers for a mortgage, due to a wave of new niche market entrants and the diversification of traditional lenders in the market.
The mortgage market is now subject to detailed regulation by the Financial Services Authority (FSA), following the mis-selling of endowment mortgages and a reduction in consumer trust. In 2005, many provider and independent financial adviser (IFA) staff had yet to meet the standards of financial advice that the FSA expects. Principles of clarity, transparency and products that fit the borrower's circumstances are prime aspects of the new regulations. The provision of clear terms of business and comparable offers should make it possible for consumers to reduce the costs of their preferred product to a minimum.
Mortgage providers generally offer the same products through indirect and direct channels, while some have become pure direct or indirect operators to reduce their costs and improve margins. The impact of technology will improve the efficiency of the market.
Telephone-mediated mortgages experienced an increase in popularity during the late 1990s, but it is likely that this channel has not expanded much in recent years. Internet-mediated sales have not fulfilled the expectations of early innovators, and currently are only offered by a small number of firms. However, sales through branches have held up. This might be related to the extensive process of applying for and processing mortgages, and to the variety of products that may confuse the applicant.
In this report, we consider the likelihood of a long-term fall or rise in house prices, and the future of the housing market.
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