Reasons to be optimistic for 2010

26 November 2009

I think it is fair to say that intermediaries will be glad to see the back of 2009. It has been a turbulent year for the industry, seeing the closure of some well known brokerages and a proliferation of dual-pricing by certain lenders.

Low interest rates have been great news for those with base-rate trackers but they have killed off the remortgage market as borrowers stay put on their lender’s cheap standard variable rate rather than moving to a higher-priced fix or tracker.

But thankfully, 2009 is drawing to a close and with only a few weeks to go until the end of the year we may as well write it off and look forward to next and there are plenty of reasons to be more optimistic about 2010.

The mortgage market has already begun its slow recovery, with a number of lenders cutting fixed and tracker rates in recent weeks. There is more of an appetite to lend at higher loan to value ratios, although lenders could still do more in this market.

But the slow recovery in the mortgage market will continue into next year and beyond, driven by house-price inflation, rising interest rates in 2011 and gradual easing of funding.

The intermediary proportion of the market will increase although this will take time, with 2007 levels not reached for many years. But while recovery will be slow, those of us who are still around are in better shape to take advantage. Job cuts, office closures and retrenchment have been painful but we are leaner, slicker operations than we were back in the heyday of the market.

As the intermediary share of the market stabilises and then grows throughout 2011 and 2012, we will be well placed to benefit.

The remortgage bubble will release when rates start moving upwards. Borrowers have enjoyed low interest rates for some time but this situation cannot continue indefinitely. When there is an incentive to remortgage, many borrowers will need advice to help them.

As far as the housing market is concerned, prices surprised many by rising in some parts of the UK in the second half of 2009. Savills expects prices to soften a little in 2010 as pent-up demand begins to be satisfied and more properties come on to the market. As a result, mainstream markets are forecast to fall by 6.6 per cent but at no point will they reach the lows seen in the first quarter of 2009.

There will be a degree of uncertainty next year, which will have an impact on the housing and mortgage markets. The general election could result in public spending cuts, higher taxes and interest rate rises, depending on which party wins.

But the big question mark hanging over the industry is regulatory influence, which will bring uncertainty to the extent and shape of the recovered market.

We wait with bated breath for the detailed proposals for change in the mortgage market review and hope that the regulator sees sense in finding the balance between useful regulation and allowing the market to function efficiently on its own.

Mark Harris is managing director of Savills Private Finance

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