Table of Contents
Issues in the Market
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- Key Issues
- Market definitions
- Abbreviations
Future Opportunities
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- Mortgage ownership is declining, reflecting the fall in first-time buyers
- Housing market is likely to remain subdued in 2010, but there could be a strong pick-up in remortgage activity
- Uncertainty reigns
- Out with the old and in with the new
Market in Brief
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- A large target market
- Recent performance: New business down sharply
- Short-term outlook: Market faces a slow and steady recovery
- Trading environment and recent developments
- Market contraction has led to a loss of competition
- Leading lenders
- Intermediaries lose distribution share
- Adspend continues to decline
- TGI research: Mortgage ownership falls
- Mintel’s consumer research: Key findings
- The typical mortgage borrower
- Recent payment experience and views on switching
- Attitudes towards mortgage advice, online channels and product fees
- Targeting opportunities
Internal Market Environment
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- Key points
- Boom years come to an end
- Credit crunch claims many casualties
- Government intervention to improve liquidity…
- …but fears heighten over future funding
- Bank of England halts quantitative easing programme
- Fall in LIBOR boosts lenders’ profit margins
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- Figure 1: Bank of England base rate, three-month (monthly average) LIBOR and new mortgages effective rate, January 2004-December 2009
- Insight and implication
- Approvals for house purchase rose by a fifth in 2009
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- Figure 2: Number of monthly mortgage approvals (seasonally adjusted), by type, December 2007-December 2009
- Affordability remains a major hurdle for FTBs
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- Figure 3: Mortgage payment as a proportion of income and deposit as a proportion of price, by type of borrower, 1990-2009
- Repossessions hit 14-year high, but below initial expectations
- Homeowners Mortgage Support
Broader Market Environment
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- Key points
- Economic backdrop: indicators suggest a mixed picture for the mortgage market
- Question mark over maintaining the bank base rate at its current level
- Improved consumer sentiment could raise demand for mortgages…
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- Figure 4: GfK Consumer Confidence Barometer – UK, January 1988-January 2010
- …but funding issues mean that demand could be stifled by a lack of supply
- More moderate income and spending growth going forward
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- Figure 5: Total PDI, consumer expenditure and savings ratio, at current prices, 2004-13
- Decline in expected borrowing activity
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- Figure 6: Savings, investment, borrowing and debt repayment – consumers’ expected activity, quarterly indices, June 2002-December 2009
- Mortgage and house-buying intentions slip further…
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- Figure 7: Expected mortgage and property purchase activity, quarterly indices, Q3/Q4 2002-Q3/Q4 2009
- …although housing transactions have picked up recently…
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- Figure 8: Number of UK residential property transactions with a value of £40,000 upwards – seasonally adjusted, Q4 2005-Q4 2009
- …and, since mid-2009, property prices have also risen
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- Figure 9: Annual change in UK house prices – comparison of four sources, Q1 2004-Q4 2009
- Debt-to-income ratio stabilises in 2009
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- Figure 10: The value of personal sector debt (mortgages and consumer credit) and as a proportion of total PDI, at current prices, 2000-09
- Mortgage debt write-offs rise
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- Figure 11: Quarterly write-offs of lending to individuals, by sector, Q2 2004-Q4 2009
Regulation Round-up
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- Key points
- Current regulatory system needs updating
- Mortgage Market Review
- New measures to protect customers in arrears
- Buy-to-let and second-charge mortgages to come under FSA remit
- Self-cert under threat
- LTV and LTI caps still up for debate
Trade Perspective
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- About the respondents
- Post-crunch, big players with access to diverse funding sources will have the competitive edge
- Lenders starting to raise LTVs and are bundling products to grow customer relationships
- MMR reaction: Some measures are deemed unnecessary
- ‘Approved persons’ regime: An extra cost burden
- Distinction between fast-track and self-cert needs to be clarified
- Still a fragile market, but the worst is behind us
- Final thoughts
Competitive Context
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- Key points
- Over two thirds of UK dwellings are owner-occupied
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- Figure 12: UK housing stock, by tenure, 1991-2009
- UK mortgage market transformed in the decade leading up to the credit crisis
- All change
- Crisis impact
- Specialist lenders’ share of outstanding mortgages slips back to 25%
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- Figure 13: Total mortgage balances outstanding (not seasonally adjusted), by type of lender, Q4 1993-Q4 2009
- Changing competitive environment
- Asset disposals set to bring fresh blood into the retail banking and lending markets
SWOT Analysis
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- Figure 14: The UK mortgage market – SWOT analysis, 2010
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Who’s Innovating?
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- Key points
- Product availability improves, but there’s little in the way of innovation
- Lenders slowly returning to the first-time buyer market
- Some competition starts to seep into the market
- New product development in the specialist sector focuses on affordability
Market Size and Forecast
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- Key points
- Gross new lending declined by 44% in 2009
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- Figure 15: Total mortgage lending, by gross and net advances (not seasonally adjusted), 2001-09
- Contributory factors
- Redemptions have fallen over the past two years
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- Figure 16: Monthly mortgage repayments, by type (seasonally adjusted), January 2006-November 2009
- An uncertain future for the mortgage market
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- Figure 17: Total mortgage lending, by gross and net advances, 2010-14
- Factors incorporated
- Summary of key future trends
Market Segmentation
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- Key points
- Most specialist lenders have fallen by the wayside
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- Figure 18: Gross mortgage lending, by type of lender (not seasonally adjusted), 2004-09
- Lack of competition has led to a sharp reduction in remortgage activity
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- Figure 19: Gross mortgage lending, by type of loan, 2004-09
- First-time buyer loans edge up slightly in 2009
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- Figure 20: Loans advanced for house purchase, by type of borrower, 2004-09
- Mortgage PSD trends
Lender Rankings
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- Key points
- Key financials for the top six lenders in 2009
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- Figure 21: Top six mortgage lenders, by gross advances, 2009
- Crisis consolidates the market
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- Figure 22: Lenders’ share of the mortgage market, by amounts outstanding, 2007 and 2008
- Lloyds’ acquisition of HBOS creates mortgage giant
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- Figure 23: Lenders’ share of the mortgage market, by gross advances, 2007 and 2008
- More exits, more change
- Outlook for 2010
- Market exits pave the way for new entrants
- New brands, fresh approach
- Home and Savings Bank
- Metro Bank
- Post Office
- Tesco Bank
- Virgin Money
- Walton & Co
Companies and Products
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- Barclays/Woolwich
- Co-operative Financial Services/Britannia
- HSBC
- Lloyds Banking Group
- Nationwide Building Society
- Northern Rock
- RBS/NatWest
- Grupo Santander
Brand Communication and Promotion
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- Key points
- Mortgage adspend falls again
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- Figure 24: Total advertising expenditure on mortage products and services, 2005-09
- Equity release attracted the greatest proportion of industry adspend in 2009
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- Figure 25: Advertising expenditure on mortgage products and services, by sub-product category, 2005-09
- Halifax was the leading advertiser of mortgages in 2009
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- Figure 26: Advertising expenditure on mortgage products and services (excluding equity release), by top 20 advertisers, 2007-09
- Press and TV accounts for most mortgage advertising
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- Figure 27: Proportional distribution of mortgage adspend (excluding equity release), by media type, 2007-09
Brand Elements
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- Key points
- Brand map
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- Figure 28: Attitudes towards and usage of mortgage brands, February 2010
- Brand qualities of mortgage brands
- Stability most sought after
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- Figure 29: Personalities of various mortgage brands, February 2010
- Experience of mortgage brands
- Halifax still leading, but losing share
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- Figure 30: Consumer usage of various mortgage brands, February 2010
- Brand consideration for mortgage brands
- Northern Rock has lost its appeal
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- Figure 31: Consideration of various mortgage brands, February 2010
- Brand satisfaction for mortgage brands
- Nationwide and Santander are the best performers
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- Figure 32: Satisfaction with various mortgage brands, February 2010
- Brand commitment to mortgage brands
- Lloyds TSB has greatest loyalty
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- Figure 33: Commitment to various mortgage brands, February 2010
- Brand intentions for mortgage brands
- HSBC, Nationwide and Santander have best future usage potential
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- Figure 34: Future usage intentions for various mortgage brands, February 2010
- Brand recommendation for mortgage brands
- Anything but a British bank
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- Figure 35: Recommendation of various mortgage brands, February 2010
- Halifax
- What the consumer thinks
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- Figure 36: Attitudes towards the Halifax brand, February 2010
- The Co-operative Bank
- What the consumer thinks
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- Figure 37: Attitudes towards The Co-operative Bank brand, February 2010
- Santander
- What the consumer thinks
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- Figure 38: Attitudes towards the Santander brand, February 2010
- Northern Rock
- What the consumer thinks
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- Figure 39: Attitudes towards the Northern Rock brand, February 2010
- Nationwide
- What the consumer thinks
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- Figure 40: Attitudes towards the Nationwide brand, February 2010
Channels to Market
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- Key points
- Intermediary share declined in 2008/09…
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- Figure 41: Proportional distribution of regulated mortgage sales, by channel, 2006/07-2008/09
- …forcing many to exit the market
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- Figure 42: Number of mortgage ARs and DA intermediary firms, by type, 2006-09
The Consumer – Mortgage Ownership Trends
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- Key points
- Mortgage penetration has declined steadily over the past seven years
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- Figure 43: Trends in mortgage ownership, 2003-09
- Four in five mortgages are jointly held
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- Figure 44: Mortgage held solely or jointly with another person, 2009
- Over 50% of mortgage borrowers have had their mortgage for more than five years
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- Figure 45: How long ago mortgage was first taken out, 2005-09
- First-time borrowers account for two fifths of the market
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- Figure 46: Proportion of first-time mortgage borrowers, 2009
- More than half of all borrowers have a repayment-only mortgage
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- Figure 47: Type of mortgage held, 2006-09
- Medium-term fixed-rate mortgages are still the most popular type
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- Figure 48: Type of interest rate on mortgage, 2006-09
- The proportion of borrowers remortgaging has declined year on year since 2005
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- Figure 49: Proportion of mortgage borrowers who have remortgaged in the past year, 2005-09
- Over two thirds have increased their mortgage debt at some point
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- Figure 50: Proportion of mortgage borrowers who have ever increased their mortgage debt, 2009
The Consumer – Property Ownership and Aspirations
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- Key points
- About Mintel’s consumer survey
- Proportion of people saving up for first home has declined since 2006
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- Figure 51: Property and mortgage ownership, 2006-09
- Over half of those aged 35-54 have a mortgage
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- Figure 52: Property and mortgage ownership, by age, December 2009
- Women are more likely to be outright owners than men
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- Figure 53: Property and mortgage ownership, by gender and socio-economic group, December 2009
- Personal wealth determines home ownership
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- Figure 54: Property and mortgage ownership, by household income, December 2009
- Identifying the core target groups
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- Figure 55: Target groups identified for the UK mortgage market, December 2009
The Consumer – Expected House Price Movement
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- Key points
- Most UK adults do not anticipate further house price falls in 2010
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- Figure 56: Expected house price movement over the next year, December 2009
- FTB prospects are less confident than existing homeowners
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- Figure 57: Expected house price movement over the next year, by tenure groups, December 2009
- Expectations are influenced by personal experience and aspirations
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- Figure 58: Expected house price movement over the next year, by age, December 2009
The Consumer – Recent Activity and Future Plans
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- Key points
- A third of mortgage borrowers are better off than a year ago
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- Figure 59: Agreement with statements about owning property, recent activity and future plans, by tenure groups, December 2009
- Housing and mortgage markets are set to remain subdued in 2010
- The affluent reap the rewards, while the less-well off struggle
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- Figure 60: Agreement with statements about owning property, recent activity and future plans, by gender and socio-economic group, December 2009
- Young borrowers are most fearful of being in negative equity
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- Figure 61: Agreement with statements about owning property, recent activity and future plans, by age, December 2009
The Consumer – Buying Behaviour
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- Key points
- A fifth of mortgage borrowers and FTB prospects are happy to arrange a mortgage without advice
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- Figure 62: Agreement with statements about arranging/choosing a mortgage, by tenure groups, December 2009
- High product fees deter a fifth of mortgage borrowers
- Presence of a branch is not a concern for most mortgage borrowers and FTB prospects
- Tesco Bank could gain a respectable share of the mortgage market
- One in four people who are planning to get a new mortgage or remortgage are happy to eschew expert advice
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- Figure 63: Agreement with statements about arranging/choosing a mortgage, December 2009
- Attitudes vary among the main demographic sub-groups
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- Figure 64: Agreement with statements about arranging/choosing a mortgage, by gender and socio-economic group, December 2009
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- Figure 65: Agreement with statements about arranging/choosing a mortgage, by age, December 2009
- Further analysis
Appendix 1 – Property and Mortgage Ownership by Demographics
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- Figure 66: Property and mortgage ownership, by demographics, December 2009
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Appendix 2 – Profile of Mortgage Borrowers & FTB Prospects
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- Figure 67: Profile of mortgage borrowers and FTB prospects versus the total sample, by demographics, December 2009
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