It is that time of year again when many of us are writing our business plans for 2011. I can usually identify and separate out the knowns from the unknowns. This year, however, the situation is more volatile as many of the typical knowns are dependent on future Government and regulatory policy, along with customer behaviour. This will only unravel when the period of Parliament becomes more established and the regulatory situation clearer.
Gross mortgage lending is likely to be less than last year’s £145bn, with estimates for 2010 of between £135bn and £140bn. Some mortgage lenders are already stating there will be less lending in 2011, particularly in the intermediary sector.
Furthermore, with any new lenders potentially having to change their proposition to satisfy more stringent regulatory requirements, gross lending for next year might not be much more than £130bn.
What does this all mean for high-street mortgage brokers and distributors like ourselves, who have had to cope with less lending in all categories, coupled with the major issue of dual-pricing?
The message about diversifying into protection and general insurance has clearly been taken on board as sales are improving in both areas, albeit from a much reduced number. That said, there are still around 11.5 million borrowers in the UK who will be seeking out intermediaries for advice, reassurance and ongoing assistance.
Alongside the usual one year’s planning and budgetary exercise, many businesses will also have to update their three to five-year business plans, mapping out the potential issues, opportunities and concerns over this period.
This is primarily because we could all be spending large sums on technology, staffing and premises, coupled with entering into long-term contracts and arrangements with a variety of product providers and other service providers. This is where some of us have to be either clairvoyant or seek out research from organisations that are looking towards the future.
For instance, Friends Provident has worked alongside Future Foundation to produce three separate reports titled Visions of Britain 2020, which can assist in making future assumptions.
The three reports issued so far are not specifically about the mortgage market but they can help with planning, as I believe that over the coming years the Government and the Bank of England will be ensuring that those in the banking and lending industry do not repeat the near disastrous experiences of the past.
The future will be more controlled, with less finance for home ownership. More people will be moving into a culture of renting. This will send shivers down the spines of some mortgage intermediaries but the reality is that the mortgage market is likely to decline further before it shows signs of long-term improvement.
However, I believe the challenges facing the mortgage market will lead to opportunities opening up elsewhere. Diversification is one such example but so too is the need for intermediaries to embrace emerging opportunities in the rental sector.
John Malone is executive chairman of PMS