What you need to know

Following a difficult 2019, the mortgage market was expected to return to solid growth in 2020. However, the arrival of COVID-19 has dwarfed even the Brexit-related uncertainty, which resulted in a 0.4% fall in total gross mortgage lending in 2019. The market had a strong start to 2020, but with the housing sector effectively frozen during the lockdown period, the mortgage market will be even more dependent on remortgaging activity.

At the same time, lower interest rates will continue to put pressure on margins in a competitive market, while the inevitable economic slowdown and sharp increase in unemployment will mean that lenders will face rising levels of mortgage arrears. The situation is made even more challenging by the circumstances surrounding the COVID-19 outbreak. In particular, there is huge potential for reputational damage if banks are seen as being too hard on people whose lives have already been disrupted by COVID-19.

The government, financial services providers and consumers will be striving to return to normal as quickly as possible. However, the threat posed by the coronavirus outbreak and the nationwide lockdown is such that 2020 is set to be one of the most difficult years for the economy as a whole, and mortgage lending will take a major hit.

Key issues covered in this Report

  • The impact of COVID-19 on market performance and dynamics in the mortgage sector.

  • How COVID-19 will impact consumer behaviour and mortgage preferences.

  • Analysis of competitive strategies and innovation.

  • Mortgage ownership among consumers, their mortgage-related plans, channel preferences, and their interest in key product features.

Products covered in this Report

This Report includes discussion of residential mortgages used for the following reasons:

  • House purchase: the loan is used to purchase a property.

  • Remortgage: where a mortgage borrower redeems his/her existing mortgage with their current lender and takes out a new mortgage on the same property.

  • Further advance: a form of additional borrowing offered by lenders to their existing mortgage customers for the purposes of home improvements or to buy a car etc. By taking out a further advance, a borrower is increasing their overall mortgage debt with the lender.

For the purposes of this Report, Mintel has used the following definitions of mortgage interest rates:

  • Fixed rate: the interest payments are fixed for a set period of time, after which the borrower will be moved on to another rate, such as the lender’s standard variable rate.

  • Standard variable rate (SVR): the interest varies with the lender’s mortgage rate.

  • Tracker rate: the interest rate moves up or down by tracking an external rate, such as the Bank of England base.

  • Discounted rate: the interest rate varies with the lender’s SVR, but the rate is also discounted for a set period of time.

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