Table of Contents
Executive Summary
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- The market
- Gross lending fell in 2019
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- Figure 1: Gross mortgage lending, 2015-19
- Significant contraction expected in 2020, followed by a return to growth
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- Figure 2: Forecast of gross mortgage lending (adjusted for COVID-19), 2014-24
- Before COVID-19, housing market was poised for a rebound in 2020
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- Figure 3: Annual change in average UK house prices – ONS and Nationwide house price indices, January 2010-December 2019
- Interest rates to remain low, with effect of emergency measures still to be seen
- FCA releases mortgage prisoners
- Impact of COVID-19 on the mortgage market
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- Figure 4: Expected impact of COVID-19 on mortgages, short, medium and long-term, 30 April 2020
- Companies and Brands
- Top 10 lenders dominate the market
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- Figure 5: Top 10 UK mortgage providers, by outstanding mortgage balances at year-end, 2019
- Tesco Bank and Sainsbury’s Bank exit mortgage market
- LBG and Santander target FTBs
- Nationwide to prioritise later-life mortgages
- HSBC targets growth in market share
- Lenders to compete on ‘green mortgages’
- The consumer
- 27% of adults have a mortgage
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- Figure 6: Current housing situation, February 2020
- 61% of borrowers have a fixed-rate loan
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- Figure 7: Type of mortgage held, February 2020
- Quarter of existing deals arranged within the last 12 months
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- Figure 8: Timing of last mortgage purchase, February 2020
- A quarter of adults expects some mortgage activity within a year
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- Figure 9: New mortgage plans, February 2020
- 70% interested in fixed-rate deals
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- Figure 10: Future mortgage-type preferences, February 2020
- Five-year fixed deals hold the most appeal
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- Figure 11: Preferred length of fixed-term deal, February 2020
- People prefer to separate legs of their customer journey by channel
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- Figure 12: Channel preference, February 2020
- A majority are interested in overpaying
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- Figure 13: Interest in mortgage features, February 2020
- What we think
The Impact of COVID-19 on Mortgages
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- Short, medium and long-term impact on the market
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- Figure 14: Expected impact of COVID-19 on mortgages, short, medium and long-term, 30 April 2020
- Opportunities and Threats
- Lockdown restrictions temporarily halt the market
- Market to depend on remortgaging activity as home-purchase is put on hold
- Competition will increase in some sectors of the market
- FinTechs will face funding difficulties
- Lenders brace for growing arrears and bad debts…
- …delaying impact of emergency measures
- Impact on the market
- A significant contraction in lending in 2020 before a return to growth in 2021
- Further government intervention anticipated to boost housing market activity
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- Figure 15: Forecast of gross mortgage lending (adjusted for COVID-19), 2014-24
- Figure 16: Forecast of gross mortgage lending (adjusted for COVID-19), 2014-24
- Shifts in consumer behaviour
- Household finances were in good shape prior to COVID-19
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- Figure 17: The financial well-being index, April 2015-April 2020
- Confidence will take time to recover
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- Figure 18: The financial confidence index, April 2015-April 2020
- Impact on key consumer segments
- People with mortgage commitments more likely to be worried about the impact of COVID-19
- Higher incomes groups are worried, but some will receive a financial boost
- Uncertainty is likely to hit renters’ plans
- First time buyers will be hit hard by tighter lending criteria…
- …which could prompt further state intervention
- How a COVID-19 recession will reshape the market
- Rising unemployment with hamper market in the medium term
- A different type of recession for lenders…
- …and a different response from the government
- Low interest rates will help to support lending
- Impact on the Marketing Mix
- Marketing to focus on supporting customers
- Online channels will move to the fore
- …but opportunities remain for personalised service
- Consumers to shop around for the best deals…
- …with a renewed regulatory focus on mortgage switching
- Government intervention brings payment holidays into focus
- Fixed deals vs variable rates
- COVID-19: Market context
Issues and Insights
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- COVID-19 delays rebound of mortgage market
- The facts
- The implications
- People will yearn for stability and reassurance, while providers will look to differentiate themselves
- The facts
- The implications
The Market – What You Need to Know
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- Gross lending fell in 2019
- Volume of new mortgages declined by 4.3% in 2019
- Share of intermediated mortgages continues to grow
- Before COVID-19, housing market was poised for rebound in 2020
- FCA releases mortgage prisoners
Market Size and Forecast
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- Gross lending fell in 2019
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- Figure 19: Gross mortgage lending, 2015-19
- COVID-19 – market forecast
- Significant contraction is expected in 2020, followed by a return to growth.
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- Figure 20: Forecast of gross mortgage lending (adjusted for COVID-19), 2014-24
- Figure 21: Forecast of gross mortgage lending (adjusted for COVID-19), 2014-24
- Pre-COVID-19 forecast: market was to return to steady growth
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- Figure 22: Forecast of gross mortgage lending, 2014-24
- Figure 23: Forecast of gross mortgage lending, at current and constant prices, 2014-24
- Forecast methodology
Market Segmentation
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- Volume of new mortgages declined by 4.3% in 2019
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- Figure 24: Volume of new mortgages, by purpose, 2015-19
- Value of new mortgages fell by 2.3% in 2019
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- Figure 25: Volume of new mortgages, by purpose, 2015-19
Channels to Market
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- Share of intermediated mortgages continues to grow
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- Figure 26: Distribution of regulated mortgage sales, direct versus intermediated, 2014-19 H1
- Virtually all sales are advised
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- Figure 27: Distribution of regulated mortgage sales, advised versus non-advised, 2014-19 H1
Market Drivers
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- House prices were starting to pick up
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- Figure 28: Annual change in average UK house prices – ONS and Nationwide house-price indices, January 2010-December 2019
- Interest rates to remain low…
- …but impact of emergency measures may take time to materialise
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- Figure 29: Interest rates for selected mortgages at 75% LTV and SVR, January 2014-February 2020
- Rates reflect competitive market for higher-LTV borrowers
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- Figure 30: Interest rates for two-year and five-year fixed-rate mortgages at 95% LTV, January 2014-February 2020
- New building activity slows down
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- Figure 31: Number of permanent dwellings started and completed, 2008/09-2018/19
Regulatory and Legislative Changes
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- COVID-19: FCA sets out guidance for lenders
- FCA modifies advice rules to encourage consumer choice
- Loyalty penalty continues to be reviewed
- FCA releases mortgage prisoners
- End of Help to Buy ISA to encourage FTBs to find alternatives
Companies and Brands – What You Need to Know
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- Top 10 lenders dominate the market
- Tesco Bank and Sainsbury’s Bank exit mortgage market
- LBG and Santander target FTBs
- Nationwide to prioritise later-life mortgages
- HSBC targets growth in market share
- Lenders to compete on green mortgages
- TV is the main channel for advertising mortgages
Market Share
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- Top 10 dominate the market
- LBG remains the largest lender
- HSBC share expected to grow
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- Figure 32: Top 10 UK mortgage providers, by outstanding mortgage balances at year-end, 2018-19
Competitive Strategies
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- COVID-19: Lenders temporarily withdraw mortgage products
- Tesco Bank and Sainsbury’s Bank exit mortgage market
- LBG targets FTB with little or no savings
- Nationwide to prioritise later-life mortgages
- Santander looks to attract FTBs
- RBS Group and Barclays focus on transforming the mortgage journey
- HSBC targets growth in market share
- Virgin Money Group prioritises margins over volumes
Launch Activity and Innovation
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- Lenders to compete on green mortgages
- Newcastle Building Society launches LISA Mortgages
- Nationwide and Starling Bank partner with CreditLadder
- Habito introduces Habito Go
- Lenders experiment again with 15-year fixed-rate deals
Advertising and Marketing Activity
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- Above-the-line adspend jumps in 2019-20…
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- Figure 33: Total above-the-line, online display and direct mail advertising expenditure on mortgages, 2015/16-2019/20
- TV is the main channel for advertising mortgages
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- Figure 34: Total above-the-line, online display and direct mail advertising expenditure on mortgages, by media type, 2019-20
- Top 10 advertisers account for 95% of ATL adspend
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- Figure 35: Top 10 advertisers of above-the-line, online display and direct mail advertising expenditure on mortgages, 2017/18- 2019/20
- Halifax is the biggest ATL advertiser
- Nationwide to heavily promote later-life mortgages
- Santander launches new campaign featuring Ant and Dec
- Habito pushes boundaries with Mortgage Kama Sutra campaign
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- Figure 36: Habito’s Mortgage Kama Sutra campaign, November 2019
- Nielsen Ad Intel coverage
The Consumer – What You Need to Know
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- 27% of adults have a mortgage
- 61% of borrowers have a fixed-rate loan
- Quarter of existing deals arranged within the last 12 months
- A quarter of adults expects some mortgage activity within a year
- People prefer to separate legs of their customer journey by channel
- A majority are interested in overpaying
Mortgage Ownership
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- 27% of adults have a mortgage
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- Figure 37: Current housing situation, February 2020
- 71% of mortgage owners are at risk of disruptions in their income
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- Figure 38: Financial situation of mortgage owners, February 2020
Type of Mortgage Held
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- 61% of borrowers have a fixed-rate loan
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- Figure 39: Type of mortgage held, February 2020
- Emergency rate cuts could see more default to SVR
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- Figure 40: Type of mortgage held, by age, February 2020
Timing of Last Mortgage Purchase
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- Quarter of mortgage holders arranged a deal within the last 12 months
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- Figure 41: Timing of last mortgage purchase, February 2020
- 44% of over-45s have held current deal for 5+ years
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- Figure 42: Timing of last mortgage purchase, by age, February 2020
- 61% of borrowers on SVR for longer than five years
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- Figure 43: Timing of last mortgage, by type of mortgage held, February 2020
Future Mortgage Intentions
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- A quarter of adults expects some mortgage activity within a year
- 21% of mortgage holders expect to remortgage within a year
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- Figure 44: New mortgage plans, February 2020
- 70% interested in fixed-rate deals
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- Figure 45: Future mortgage type preferences, February 2020
- Five-year fixed deals hold the most appeal.
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- Figure 46: Preferred length of fixed-term deal, February 2020
Channel Preference
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- People prefer to separate legs of their customer journey by channel
- COVID-19: opportunity to capitalise on changing consumer habits
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- Figure 47: Channel preference, February 2020
Interest in Mortgage Features
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- A majority are interested in overpaying
- As deals become longer, flexibility is key
- Terms of payment holidays will receive more attention post COVID-19
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- Figure 48: Interest in mortgage features, February 2020
- TURF analysis: a combination of simple features can appeal to 90% of potential customers
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- Figure 49: Interest in mortgage features, TURF Analysis, February 2020
- People on higher incomes with fixed-rate deals are more interested in overpaying
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- Figure 50: Interest in mortgage overpayment feature – CHAID – Tree output, February 2020
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
- CHAID analysis methodology
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- Figure 51: Interest in mortgage features, CHAID analysis table output, February 2020
- TURF analysis methodology
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- Figure 52: Interest in mortgage features – TURF analysis table output, February 2020
Appendix – Market Size and Forecast
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- Figure 53: Best- and worst-case forecast of gross mortgage lending (pre-COVID-19 forecast), 2019-24
- Forecast methodology
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