The mortgage market appears to have turned the corner as, it seems, has the UK economy. With gross mortgage lending values having been in the doldrums for the last four years at around the £140bn mark, 2013 has seen a significant increase.
Gross lending will exceed £170bn for the year with an outside chance we could see £175bn. Given that the first quarter of the year was relatively quiet, if we extrapolate the last seven months into an annualised rate, it equates to a £190bn annual market.
This is why some of the predictions of a £190bn to £195bn market for 2014 are not as far-fetched as some might think. I have even heard some informed opinion talking about £205bn or even £210bn.
With the impacts caused by the MMR on the ability of some lenders to do as much business direct in 2014, the AMI does expect a higher intermediary market share. This means that brokers will be busy and why we are seeing a lot more recruitment and the return of training schemes. In some business plans, intermediary firms are predicting that they will be writing 60 per cent more gross mortgage business in 2014 than they wrote in 2012.
There are, however, a couple of words of caution. First, this growth has been stimulated by a range of government initiatives which have restored consumer and industry confidence and provided much needed funding. Buth there are tales of builders running out of stock and therefore we need more new houses to be built. It is important that having been given this opportunity, builders grasp the nettle and really stretch themselves. Any failure on their part is unlikely to receive a sympathetic ear in Westminster. This is because it is the new build market that has been fuelling the growth to date.
Second, in an expanding market brokers must not get sucked back into any of the old ways. They must be vigilant on fraud. They must assess new lenders carefully. They need to ensure the products they recommend really fit what customers need and act in customers’ best interests at all times.
The MMR is still some months away but everyone in the market needs to be aware of its intention, particularly that house price inflation should not be considered as a rationale to borrow or lend.
Libor linked lending will always be a tough one for consumers to understand. As investment advisers are acutely aware, because a firm is FCA authorised and regulated does not in any way reduce the need for the adviser to fully assess the provider and the product to ensure they meet their customer’s risk and requirements profile.
Investment advice firms are facing large bills for the failure of some to do this adequately over Keydata and Arch Cru, who were both authorised firms.
So whilst new entrants to the market are welcome and product innovation is essential, it is the role of intermediaries to fairly and independently assess the offerings and assess whether as a qualified professional they meet their customer’s needs and fit within the advisers regulatory responsibilities. And as recent events have shown, suggesting buy-to-let to get round lenders affordability rules is not a standard we want in our industry.
Robert Sinclair is chief executive of the Association of Mortgage Intermediaries