Table of Contents
Executive Summary
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- The mortgage market
- Low interest rates create favourable lending environment
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- Figure 1: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for 2 year variable rate mortgage and 2 year fixed rate mortgage both at 75% loan to value, January 2008-December 2014
- Gross mortgage lending expected to continue growing
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- Figure 2: Forecast of gross mortgage lending, 2009-19
- The mortgage advice market
- The MMR has reshaped the market in favour of advised sales…
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- Figure 3: Distribution of regulated mortgage sales volume, advised versus non-advised 2007/08-2013/14
- …and intermediary distribution has taken precedence
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- Figure 4: Distribution of regulated mortgage sales volume, by channel, 2007/08-2013/14
- The internet has grown into an important channel to market
- The consumer
- 37% of borrowers use their lender for advice, but intermediaries are catching up
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- Figure 5: Main source of advice used in arranging last mortgage, December 2014
- Over 80% of advised mortgage owners are happy with the service received
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- Figure 6: Satisfaction with adviser service, December 2014
- Online sources are changing the advice landscape
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- Figure 7: Sources of mortgage information in future, December 2014
- Peace of mind and trust are the key drivers behind advice consumption
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- Figure 8: Attitudes towards advisers, December 2014
Issues & Insights
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- The MMR has swung the market in favour of independent advice
- The facts
- The implications
- Despite best intentions, technology could threaten advised sales
- The facts
- The implications
- Pension reforms create opportunities for equity release and buy-to-let advice
- The facts
- The implications
The Market – What You Need to Know
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- One year on, the market is still adjusting to the MMR
- Lending has risen steadily but house prices put a squeeze on demand
- Intermediaries are in the ascendency as the value of independence grows
- The online channel is disrupting traditional customer acquisition
Market Drivers
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- Low interest rates encourage bargain-hunting
- Whole-of-market advisers should benefit from interest rate jitters
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- Figure 9: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for 2 year variable rate mortgage and 2 year fixed rate mortgage both at 75% loan to value, January 2008-December 2014
- High housing demand prices more consumers out
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- Figure 10: Annual change in average UK house price – Comparison of four sources, Q1 2007-Q4 2014
- Mortgage approvals curbed by the MMR
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- Figure 11: Number of quarterly mortgage approvals seasonally adjusted, by type, 2007-14
- Repossessions and arrears are still falling
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- Figure 12: Mortgage arrears (2.5% or more of mortgage balance) and repossessions, Q1 2009-Q4 2014
- Consumer confidence improves in early 2015
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- Figure 13: Financial confidence index, 2009-15
Regulatory Context
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- The Mortgage Market Review
- Time-lag provides an opportunity for independent advisers
- Intermediaries can turn affordability criteria into competitive advantage
- Almost half of consumers had not heard of the MMR
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- Figure 14: Awareness and understanding of new mortgage regulations, December 2014
The Mortgage Market
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- Gross mortgage lending exceeds £200 billion for the first time since the financial crisis
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- Figure 15: Forecast of gross mortgage lending, at current and constant prices, 2009-19
- Nearly three quarters of the mortgage market is held by the top six lenders
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- Figure 16: Top six mortgage lenders, by gross advances, 2012-14
- The regulatory burden has weighed heavily on lenders
- More first-time buyers manage to fight their way onto the ladder
- Rising market should boost re-mortgage sales
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- Figure 17: Distribution of regulated mortgage sales, by loan purpose 2008/09-2013/14
- More homeowners are re-mortgaging just to get a better deal
- The aging population will continue to increase demand for equity release
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- Figure 18: Distribution of regulated re-mortgage sales, by loan purpose 2008/09-2013/14
The Mortgage Advice Market
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- Intermediaries take control of distribution as the MMR comes into effect
- Lenders have had to improve their adviser offering
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- Figure 19: Distribution of regulated mortgage sales, by channel, 2007/08-2013/14
- MMR enforces increase in advised sales…
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- Figure 20: Distribution of regulated mortgage sales, advised versus non-advised, 2007/08-2013/14
- …but non-advised sales could make a comeback
- Concealing the cost of advice can be bad for business
- Complaints highlight importance of clarity on fees
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- Figure 21: Home finance complaints, by cause of complaint, 2010-14
Channels to Market
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- Advice channels have changed dramatically…
- …and price comparison sites have room to grow further
- Advisers need to adjust to the new environment
Companies and Brands – What You Need to Know
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- Company strategies
- Transparency plays into the importance of trust
- Advisers consolidate to overcome capacity concerns
- Innovative software gives brokers a competitive edge
- Advisers recognise the growth potential for equity release
Company Strategies
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- Transparency of fee structure acts as a unique selling point
- Which? Mortgage Advisers
- Consolidate or fail?
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- Figure 22: Number of UK authorised mortgage business firms (non-deposit taker), 2008-14* and 31 July 2014
- Intrinsic Financial Services
- Platform power is key to increasing capacity
- Mortgage Compliance & Insurance (MCI) Club
- Mortgage Advice Bureau
- The equity release market draws investment as firms tap into demand from retirees
- Independent advisers already account for 97% of equity release mortgages
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- Figure 23: Distribution of equity release mortgage sales, by channel, 2008-13
- Legal & General enters the lifetime mortgage market
- Age Partnership makes it easier for advisers to refer clients to equity release specialists
- Sesame Bankhall Group could benefit from retirement changes
The Consumer – What You Need to Know
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- Prospective first-time buyers are increasingly marginalised
- Formal advice has to learn to live alongside digital sources
- Peace of mind and trust feature highest for advisers
Mortgage Ownership
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- Mortgage ownership among the oldest and youngest is shrinking
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- Figure 24: Proportion of mortgage owners by age, December 2014
- Mintel data shows the impact of the financial crisis
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- Figure 25: Timing of last mortgage/re-mortgage purchase, December 2014
The First-time Buyer
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- Advisers need to boost awareness of Help to Buy...
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- Figure 26: Renter attitudes towards property ownership and mortgages, December 2014
- ...and advisers can help find ways to draw on the Bank of Mum and Dad
Consumer Awareness and Understanding of Regulatory Changes
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- Gap between awareness and understanding is threatening advice business
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- Figure 27: Awareness and understanding of new mortgage regulations, December 2014
- Tomorrow’s first-time buyers are in the dark
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- Figure 28: Agreement with the statement ‘I have heard of the new regulations and have good understanding of what they mean’, by gross annual household income, December 2014
Main Source of Mortgage Advice
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- Banks and building societies are the first port of call for advice…
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- Figure 29: Main source of advice used in arranging last mortgage, December 2014
- …but the value of independence means alternatives are catching up
- Younger people are more dependent on formal advice
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- Figure 30: Proportion of consumers taking any source of advice, by age, December 2014
Satisfaction with Mortgage Advice
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- The majority are happy with advice received
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- Figure 31: Satisfaction with adviser service, December 2014
Future Sources of Information
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- 44% of potential customers would turn to a bank adviser…
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- Figure 32: Sources of mortgage information in future, December 2014
- …but many plan to do their own research in addition
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- Figure 33: Proportion of consumers that are likely to use a bank/building society in future that are also likely to use other sources, December 2014
- Younger people are more reliant on friends and family for advice
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- Figure 34: Sources of mortgage information in future, by age, December 2014
Attitudes towards Mortgage Advisers
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- Consumers seek peace of mind but want to make their own decisions
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- Figure 35: Attitudes towards advisers, December 2014
- Advisers need to strike a balance between flexibility and regulatory compliance
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- Figure 36: Agreement with the statement ‘I would expect a mortgage adviser to make decisions on my behalf’, by age, December 2014
- Virtual face-to-face advice is still a niche option
Appendix – Abbreviations
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