The essential ingredients for a healthy mortgage market are competition, product innovation, a robust adviser community and, finally, the allimportant yeast of liquidity.
Product activity of late points to growing competition, with the number of exclusives in the marketplace steadily rising. Loan to values, too, are slowly edging northwards, with more 90 per cent first-time buyer products coming to market. So, a big tick there for competition and innovation on the part of the lenders.
Lenders are adopting high-street retailer tactics when it comes to shifting product, with seven-day fire sales and “midnight countdowns” in order to push up volumes.
This surge of product activity is being driven in part by the market having missed out on valuable selling days thanks to the royal wedding, bank holidays and a slow first half of the year.
I understand that there are also several mortgage lenders pending FSA approval at the moment, so we can expect no let-up in competition.
And I also know from talking to advisers recently that we have a bro-ker community continuing to meet the exacting demands of a rapidly changing market while maintaining the high quality service that they provide their clients. So, against the robust advi-ser community there is again a big tick.
And yet, we still have a depressed market. Despite having all the other ingredients to hand, the fact that credit and underwriting conditions remain tight means that there is still much to do. And talking to lenders, the recent CML 2011 gross lending forecast of a £5bn increase to £140bn looks tough in the absence of an improving risk appetite or increasing rate rise expectations to boost remortgaging.
The banks and the Government need to address the issue of liquidity and they need to do so sooner rather than later. I for one will not be holding my breath, though. In June last year, the Future of Banking Commission report made a strong case for bank lending and recently we saw business secretary Vince Cable make the case again for lending to SMEs but, as yet, there has been little evidence of increased action.
While it is great to see such a high level of competition and continuing product development in the marketplace, strict underwriting conditions mean that this market will remain tough. The banks need to up the ante and address the liquidity issue head on and with sustainability at the front of their minds.
Without more liquidity in the mix, the market will remain as flat as a pancake, potential first-time buyers will continue to rent and advisers will continue to struggle with tough credit conditions despite attractive products.
John Cupis is managing director of PMS