22% are planning to take out a mortgage to buy a property in the next two years with this figure rising to 44% among 25-34 year olds. However, not everyone’s plans will come to fruition and only 7% have actually spoken to a lender/mortgage adviser, rising to 17% of 25-34 year olds.

COVID-19 led to a sharp fall in lending during 2020 as higher-risk products were withdrawn and the housing market was temporarily shut down. A surge in housing transactions during the second half of the year was not enough to offset the earlier decline and first-time buyers remained largely locked out of the housing market due a more cautious approach to lending.

The biggest threat to the mortgage market comes from the inevitable increase in unemployment. Although the latest forecasts paint a rosier picture than earlier in the crisis, the OBR still predicts that unemployment will reach 6.5% by the end of 2021. Fears over job security will be more widespread and this will mean borrowers remain cautious about taking on debt.

The pandemic has shown how unpredictable life can be and consumers are seeking ways to future-proof their finances as a result. Mortgage lenders have an opportunity to capitalise on consumer demand for certainty and control. Already, new products have come onto the market offering longer-term fixed rates than have previously been available on the UK market. However, these products also offer no, or time-limited, exit fees, ensuring that borrowers remain in control.

Key issues covered in this Report

  • The short, medium and long-term impact of COVID-19 on the UK mortgage market.

  • How COVID-19 has affected consumer attitudes towards buying a house and how it has changed what people want from a home.

  • An analysis of competitive strategies and launch activity.

  • Levels of satisfaction with lenders, including a key driver analysis highlighting the key areas of focus to improve customer satisfaction.

  • An assessment of the most important regulatory and legislative changes and how this is affecting the mortgage market.

COVID-19: Market context

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. Rapidly rising case numbers led to the first national lockdown, starting on 23 March. It wasn't until 15 June that non-essential stores were allowed to reopen, followed by pubs, restaurants, hotels and hairdressers on 4 July and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a month-long lockdown from 5 November and Scotland introducing a new five-level system of coronavirus restrictions.

Despite these restrictions, however, case numbers continued to increase. All four UK nations tightened restrictions further in January 2021, effectively leading to a full UK-wide lockdown.

On 22 February, Boris Johnson announced the roadmap to an easing of restrictions in England, starting with the reopening of schools on 8 March, followed by easing of restrictions on outdoor gatherings on 29 March and with a hoped end to all restrictions by 21 June. The Welsh and Scottish governments also gave more details on their plans to ease restrictions, with both nations taking a slightly more cautious approach to the one planned for England.

The UK’s vaccination programme started on 8 December 2020, and with the Pfizer-BioNTech, Moderna and Oxford-AstraZeneca vaccines licensed for use in the UK, the government aims to offer a first dose of the vaccine to 32 million people by mid-April.

Economic and other assumptions

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its March 2021 Economic and Fiscal Outlook Report. After the fall of 9.9% over the course of 2020, the scenario suggests that UK GDP will grow by 4% in 2021 and 7.3% in 2022.

GDP isn’t expected to return to pre-COVID-19 levels until Q2 2022, although this is six months earlier than the OBR forecast in November 2020, mainly because of the faster-than-expected rollout of vaccines.

Unemployment is expected to peak at 6.5% in Q4 2021. As with GDP, this is more positive than the OBR’s November forecast, but the OBR does raise the prospect of long-term scarring on employment, especially in the more exposed retail and hospitality sectors.

Products covered in this Report

This Report explores the UK market for residential mortgages. This includes lending secured against dwellings and can be split into the following categories:

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

  • Remortgage: the borrower redeems their 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 other purposes than buying a home. This could include funding home improvements but can also be used for other reasons such as buying a car.

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 time the borrower will be moved to another rate, usually the standard variable rate.

  • Standard Variable Rate (SVR): the default rate charged by the lender for those who are not on any other deal or their fixed-rate period comes to an end.

  • Tracker rate: the interest rate tracks an external benchmark, usually the Bank of England base rate.

  • Discounted rate: The interest rate tracks the lender’s SVR but the rate is discounted for a set period of time.

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