View more on these topics

Long-playing record

Prospects: Helen Pow says this year has seen lending hit the heights and many new mortgage firms starting up but can the levels of business continue?

Lenders and brokers agree that 2006 has so far been a rosy year for mortgage business and most believe the positive activity should continue despite interest rate rises and an increase in bad debts.

The Council of Mortgage Lenders’ statistics show gross mortgage lending hit 32.7bn in August, a new record. This figure is up by 7.2 per cent from July and 21 per cent from August 2005’s figure of 26.9bn, proving the market is particularly buoyant right now.

But many high-street banks have added to their provisions for debt.

London and Country Mortgages broker James Cotton says. “The general trend among the banks shows that profits are up and figures are healthy but there has been an increase in some customers not meeting debt so they are putting more aside for bad debts.”

Alliance & Leicester head of mortgage intermediaries Mehrdad Yousefi believes bad debt is linked to unsecured lending. He says: “Unfortunately, a small percentage of the population borrow more than they can afford. It is very easy to go into bankruptcy and not repay loans.”

But he says he is not concerned as current bad debt figures are “higher than in recent years but low compared with historic figures.”

An influx of new lenders is stimulating the market by increasing competition.

Mortgage Force broker Robert Clifford says: “There are more new lenders coming to the mortgage market than at any time I can remember.”

Cotton says: “It looks good. If the market is looking bad, you do not see new businesses starting up.”

But GMAC-RFC head of marketing services Jeff Knight says not all lenders in today’s market will survive the next six to 12 months. He says: “The market in London is already oversupplied. We will soon see who the winners and losers are.”

Most commentators consider that August’s 0.25 per cent rise in bank base rate has not affected the mortgage market.

BM Solutions’ spokeswoman Clare Mortimer says the industry is more concerned about another anticipated hike which is likely between now and the middle of next year.

Bestinvest’s Peter O’Donovan says another rate rise depends on whether last month’s rise lowers inflation.

Cotton believes that two rises in a short time would certainly have an effect in the last quarter.

But Knight says while it might slow down part of the market, the rise is unlikely to have a huge impact because rates are still relatively low.

Yousefi suggests the anticipated hike, which could occur as soon as November, will hit first-time buyers hardest.

He says: “Interest rate rises affect consumer sentiment and first-time buyers, who stretch to buy a property, will think twice.”

Lenders are being forced to find new ways to differentiate themselves from competitors because the mass of new entrants in the market has increase broker and consumer choice.

“You are a pretty foolish lender if you think you can win on price alone,” Clifford says. Cotton agrees: “it is not just what you offer, it is how you offer it.”

Many lenders believe improving technology is the way to secure new clients and keep existing ones.

Knight says firms need to embrace rapidly advancing technology because it is a huge part of peoples’ lives and customers expect fast and convenient services.

Cotton says the competition is also encouraging lenders to offer new and “more innovative products.”

Yousefi says lenders will be increasingly vying for business over the next 12 months by relaxing lending criteria.

Many lenders will now lend 90 per cent on buy-to-let mortgages rather than the previous 85 per cent limit and lending on sub-prime and self-cert mortgages has also relaxed.

Yousefi says while 2007’s mortgage market will not be as spectacular as this year, it still looks positive.

He says: “The increase in energy prices will result in lower consumption by consumers because it is eating into disposable income for everyone.”

Yousefi predicts that interest rates will fall in the second half of next year which would be very positive for the housing and mortgage markets.

The Council of Mortgage Lenders director general Michael Coogan says: “Despite August’s gross mortgage lending figure being the 10th monthly lending record of the past year, this level of lending is sustainable and illustrates that the market is in fundamentally robust shape.”


Welsh broker denies BNP life insurance connection

Welsh mortgage and life insurance firm Financial Solutions Unlimited has rejected claims it is the broker behind the BNP’s life arm saying it has not written any business through Albion Life.The claims were made this week in a local newspaper but FSU partner Craig Francis says that “no business in any way shape or form […]

Leeds offers 5-year fixed BTL range

Leeds Building Society has launched a five-year fixed rate buy-to-let mortgage range with fee free options for those looking to remortgage their portfolio. The five-year fixed BTL mortgage provides a rate of 5.24 per cent and the fee free version offers 5.84 per cent. Both products are available up to 80 per cent LTV, with […]

25% Growth emerging

Martin Currie fund manager picks out Brazil and Turkey

Leading Edge June – Investment panel debate

RLAM’s asset class specialists discuss some of the findings from the panel session at our recent Investment Conference. By Rob Williams, Head of Distribution Welcome to the latest edition of Leading Edge. It has been an eventful six months since the last e-zine. The European Central Bank announced ongoing stimulus measures, while the immigration crisis in Europe threw the […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm