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The biggest threats to mortgage market growth

With forecasts widely predicting growth in the UK mortgage market this year, Money Marketing asks experts what potential obstacles stand in its way.

Experts say election worries and ongoing uncertainty around the Eurozone pose the biggest threat to growth in the mortgage market this year.

Gross mortgage lending in the UK has rebounded since the financial crisis, when the market fell from a high of £363bn in 2007 to just £144bn two years later, according to the Council of Mortgage Lenders. Gross advances have since increased annually to the 2014 total of £205.6bn, with the CML forecasting 7 per cent growth this year to £222bn.

Difficulties remain in the market, however, with the latest lending figures from the British Bankers’ Association showing a total of £10bn was advanced in December 2014, down 12 per cent from £11.4bn a year earlier. Despite lending falling in each of the final five months of 2014, BBA chief economist Richard Woolhouse remains “optimistic” about growth in 2015.

But is he right?

Election tension

The general election, as ever, creates huge uncertainty for the mortgage market as rival political parties vie for votes in the run-up to May.

Shadow chancellor Ed Balls says Labour will impose a mansion tax on properties valued at £2m and above to raise cash for the NHS, despite several of his own party members – including Lord Mandelson – distancing themselves from the controversial policy and calling instead for the existing council tax system to be restructured.

The Conservatives have also zeroed in on the housing market after Chancellor George Osborne unveiled plans to abolish the “slab” stamp duty structure in favour of a more progressive system.

And experts warn political uncertainty could subdue demand this year.

Capital Economics property economist Matthew Pointon says: “We do have a forecast indicating growth this year, but the election will certainly play its role. The stamp duty reforms are welcomed but the market could still change again based on who takes power in May and buying a home is a huge decision, so it could be seen as prudent to wait and find out.”

GPS Economics director Gary Styles adds: “As an economist you assume all agents act in their own self-interest and I’d certainly see waiting until after the election as an example of that. Policies could change the landscape of what it costs you to own your home and that is something people must consider.”

Economic woes

Continuing turmoil in the Eurozone also threatens to stymie growth in the UK market, Association of Mortgage Intermediaries chief executive Robert Sinclair warns.

“The upcoming Greek election could see it pull out of the EU, with a ripple effect sure to be felt across the common market,” he says.


“The UK is inextricably linked to the EU member nations and would inevitably feel the pinch of any further retractions in the Eurozone. There has been some discussion of whether or not the UK should remain in the EU and while that may be speculative at best, all of this uncertainty could have a real effect on consumer demand.”

The CML shares these concerns, noting alongside its growth forecast that “we are concerned about deteriorating prospects for the global economy, and particularly in the Eurozone, where there are concerns about low growth and deflationary pressures.”

Styles warns a profound shock in the Eurozone could hit demand in the UK, nullifying recent signs of wage growth on the back of record low inflation of 0.5 per cent in December.

He says: “With low inflation and wages moving up, albeit slowly, consumers have more real income but in a time of such economic uncertainty, it’s not abundantly clear how long that will last and again that could limit lending.

“Looking at the running numbers from the last couple of months, which is admittedly a crude calculation, we are looking at a £200-£205bn market again this year I think – perhaps slightly above. I think the CML’s forecast of £222bn might be optimistic.”

Can the current broker pool handle growth?

Despite this uncertainty, experts believe there is still capacity in the market for growth this year if the CML’s prediction is realised.

“Broker recruitment is rampant at the moment and that is happening around the UK,” Sinclair says. “The London and South East markets have been pushed close to capacity recently but there is still more room for growth around the UK and I think we’ll start to see it spread outwards more this year.”

Pointon expects growth in 2015 to be spread across the UK, rather than being centralised in London and the surrounding areas.

He says: “This may be a better year for those regions that haven’t yet seen the kind of growth the South East and London have. There is capacity in those regions, so even if the pool of brokers wasn’t growing, those regional intermediaries are ready to take on the extra volumes.

“We still believe there is growth in the market this year, but perhaps not quite as far as the CML has stated.” 



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There is one comment at the moment, we would love to hear your opinion too.

  1. Michael.White.BoutiqueCapital - Bridging Loans 6th February 2015 at 5:03 pm

    Over engineering any market causes problems…… all OK in principle, but in practice a disaster.

    We now read Basel rules could lock out first-time buyers…. unless of course they take the lender to court for infringement of Human Rights?… Bless

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