As 2018 draws to a close, the focus moves to predictions for next year’s mortgage market.
The Brexit-related uncertainties the country is facing are reverberating into the mortgage industry, according to professionals, but, there is also an air of positivity for the year ahead.
Ami chief executive Robert Sinclair predicts: “Employment levels will remain high, demand for housing will not slacken and whilst there might be some gentle price corrections these will be gradual, as now, and help rather than hinder the market.
“Gross mortgage lending will replicate this year at around £275bn and I expect the product transfer market to expand slightly to around £160bn. This will benefit intermediaries most.”
UK Finance director of mortgages Jackie Bennett says: “How the mortgage market performs next year is going to be somewhat dependent on Brexit and its impact on funding markets, general economic conditions and consumer confidence.”
The Brexit effect
The expectation of 2019 being a busy year is rife, however the looming effect of Brexit is still an evident unknown for the industry.
NAEA Propertymark chief executive Mark Hayward is more apprehensive.
He says: “As we look ahead to 2019, there’s a fog of uncertainty. Brexit is undoubtedly fuelling a sense of apprehension in the housing market, which in turn affects sentiment. With details of the final deal still unknown, both buyers and sellers will continue to hold off on making any decisions.
“We usually see demand spike in the first few months of the year, but the landscape will probably be very different in 2019 as buyers sit on the fence and adopt a ‘wait and see’ strategy until the Brexit deal is complete.”
One thing which can be clearly determined is that industry professionals want a period of stability for the market to settle.
As well as big economic changes, Investec business development manager Peter Izard points to the many recent legislative regulatory changes as another point of contention.
He says: “No doubt, until we are clear of the future path the UK is taking, the market will continue to be in a state of wait and see.”
Bennett says: “We do expect that the buy-to-let market will continue to see the impact of recent tax and legislative changes, particularly as landlords have to start paying their increased tax bills.
Unlike Izard, Bennett believes that the mortgage industry has benefitted from a period of relative regulatory stability, and that we are seeing “innovation and developments that enable lenders to serve their customers better,” she says.
“I’m sure neither we, nor the regulator or government, would want this innovation, creativity, competition and judicious risk-taking to be stifled by the absence of a longer-term strategic approach to legislation and regulation.”
Primis and PTFS proposition director Vikki Jefferies says: “I would like to see new products for customers that fall outside of the traditional cookie cutter criteria set by the high street lenders.
“With the chancellor confirming the BTL market will be left untouched in his latest budget announcement, I really hope to see more of the market offering attractive solutions to landlords and first-time buyers would benefit from greater incentives too.”
Izard comments: “Predicating the future path of interest rates and other housing related forecasts is coupled with caveats and caution and hence the requirement for a clear direction to this most complex matter.”
Sinclair adds: “Rates will remain competitive with gentle innovation continuing.”
Arla Propertymark chief executive David Cox adds: “The PRS has undergone a tsunami of change over the last few years, and there are difficult times ahead with the tenant fees ban is expected to come into effect next year.
“However, looking further ahead we firmly believe that the industry will come out stronger, more professional and better respected at the other side.”
Product distribution is expected to be addressed in 2019. New affordability requirements have created the issue of certain customers being unable to access the full spectrum of mortgages, and an FCA report, due in the first quarter of 2019, is expected to address this.
Bennett says: “There are thousands more customers with inactive lenders or unregulated owners that we are unable to help. Many of those customers cannot meet the new affordability requirements and lenders cannot use the previous transitional arrangements, because of the way the mortgage credit directive was implemented in the UK.
“We are exploring with the FCA what might be possible for these customers and expect this work to continue into 2019. But this is likely to require handbook changes at the very least, and possibly legislative changes.”
White Financial Services founder Daniel White adds: “Product distribution creates an unfair market not only to the broker but ultimately to the client.
“If not, all mortgage professionals can access all available products then I’m not quite sure how this can create a fair and transparent market for the client, something the FCA may want to consider especially when reporting that not all consumers have the ‘cheapest rate’ in their interim report.”
The future of fintech
Another area which is expected to become clearer in 2019 after the FCA mortgage market report is technology.
Bennett says: “The mortgage industry is set for a busy start to 2019, with several important papers from regulators expected in the first quarter.
“A key moment for the mortgage industry will be the final report of the FCA’s mortgage market study. One issue I hope the final report won’t touch on is the future direction of travel on fintech.”
Sinclair believes that tech will “remain a battleground as firms continue to try to convince everyone that they have the best and only solution. However, I think we are on a journey over the next two to three years before we can have any degree of certainty.”
Meanwhile, Jefferies says: “As we look ahead to 2019, we need to make the industry more digitally focused in order to simplify the mortgage process.
“Having technology that offers both ease of use and efficiency will be a key differentiator for lenders, as customers look for lenders that promise a simple, hassle free journey.
“This will be particularly beneficial for the growing specialist lending market, where advisers can now use digital tools to help them meet the needs of their ever-expanding client base.”
Despite the political upheaval witnessed since the Brexit referendum in 2016, the positivity expressed for next year from the mortgage market is undeniable. However, it is clear that the FCA’s much-awaited mortgage market study release will dictate much of how the industry proceeds.