The pointers for the housing market for the next year are far from clear. Each week, conflicting evidence emerges about house prices and, to a lesser extent, volumes in the market. Although the two factors are inevitably linked, too little analysis is carried out into the real linkage, as it is not as simple as supply and demand.
The reality, borne out by earlier downturns, is that when prices fall, the only movers are forced sellers of one form or another or those who are making a positive move to the rented sector, speculating on their ability to buy back lower in the cycle.
But these two groups are trivial in relation to the market as a whole. Thus, I predict a fall in house purchase activity, with the majority of pain being felt in the upper echelons of the market. However, this fall will be offset by sustained pressure in the remortgage market, notably from refinancers looking for lower rates.
In the past three years, the booming mortgage market has seen total lending of well over £500bn. The vast majority of this has been written on churn products of two or three years' duration.
Led by intermediary exclusives, rates have been most competitive in the short-term sector. About 40 per cent of this volume has been remortgage business.
These borrowers are not going to stop being rate hunters as they have already experienced the benefits. Similar arguments apply to those who have moved house in this period. Their propensity to remortgage is greater than ever before. Add to this the likely softening of the economy and consumers' desire to reduce the price of their biggest outgoing and you have the makings of a strong market.
Lenders, faced with the prospect of their newly profitable book haemorrhaging away, are likely to raise their game on customer retention.
Nationwide Building Society's last attempt at value for all failed because it simply did not satisfy customers' price appetite. However, more lenders will now offer their existing book normal new-business products on the simple basis that it costs less to retain than to replace, with the associated marketing costs and distribution costs.
I anticipate far more proactivity rather than the reactionary stance that too many lenders have employed in the past. It is normally too late to recapture a customer once he has made the decision to move. Lenders will also make greater efforts to use offset loans as loyalty tools.
But do not think this activity will lead to less competitive pricing. Massive excess lending capacity continues and there will still be plenty of lenders hungry for greater market share.
Confusingly, this will lead to increases in procuration fee levels. This will be most marked in more innovative long-term fixed-rate products as lenders seek to lock in customer longevity by taking a measured risk on redemptions.
The implications of this market for intermediaries are all too clear. Customers refinancing purely to lower their interest rate are the most cost-conscious of all. While the super-prime market will continue to bear fees, the mainstream market will become ever more resistant to the fee-based model where the reality of mortgage advice is one of product selection.
The value of the face-to-face proposition will also decline for those borrowers simply wanting a better rate. For all these reasons, cost-efficiency must improve dramatically and it is likely that individual remuneration packages in the biggest firms will come under pressure. Intermediaries should also look to explore the sub-prime and equity-release markets more professionally as both are advice-led sectors that all agree will grow.
But mortgage broking will be one of the success stories of the next couple of years as the industry consolidates around a smaller series of groupings. Most traditional investment-based IFAs are eyeing the mortgage business enviously, with Hargreaves Lansdown already jumping the fence. Will they start a new market for execution-only distribution with rebates of procuration fees? Perhaps. After all, it costs less than you would pay a salesman.
Mark Chilton is an independent mortgage expert