Table of Contents
Issues in the Market
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- Key issues covered in this report:
- Abbreviations
Insights and Opportunities
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- Focusing on retention
- Could outsourcing help to cut costs?
- Attracting FTBs through the Internet
- Personalised products
Market in Brief
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- Rising interest rates are expected to take steam out of property market
- Property is perceived to be a good investment
- Demand for rental properties is expected to remain strong
- Affordability issues drive innovation
- 2006 saw record levels of lending
- Specialist lenders are increasing their share of the market
- £448.5 million was spent advertising mortgages over the last five years
- The distribution landscape continues to evolve
- Over 17 million people in the UK have a mortgage
Fast Forward Trends
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- Trend 1: Failure to launch
- Definition
- Context
- Market touchpoints/implications
- Trend 2: Downhill SKIing
- Definition
- Context
- Market touchpoints/implications
- Trend 3: Back to my roots
- Definition
- Context
- Market touchpoints/implications
Broader Market Environment
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- Rising interest rates may soon take the steam out of the property market
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- Figure 1: The Bank of England’s base rate, January 1991-January 2007
- Unsecured lending falls for second consecutive year
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- Figure 2: Total gross unsecured and secured lending, 2000-06
- Unemployment levels are beginning to creep upwards
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- Figure 3: Size of the total workforce and the proportions unemployed and self-employed, 2000-11
- A third of GB households are one-person
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- Figure 4: Composition of GB households, 2005
Internal Market Environment
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- Homeowners perceive property to be a good investment
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- Figure 5: Attitudes towards owning property, December 2006
- The proportion of owner-occupied households is increasing
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- Figure 6: Housing tenure – UK, 1981-2006
- An increasing number of home buyers are being hit with stamp duty
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- Figure 7: Stamp duty thresholds and levies, 2007
- The number of property transactions surpassed 1.7 million in 2006
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- Figure 8: Number of property transactions – England & Wales, 1980-2006
- Rising house prices have had a major impact on the housing market
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- Figure 9: DCLG house prices at mortgage completion stage – UK, 1971-2006
- The differences by region in house prices are vast
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- Figure 10: Regional average house prices (non-mix-adjusted third quarter) – England and Wales, 2000-06
- House inflation is outpacing wage inflation
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- Figure 11: House price to earnings ratio, 1970-2006
- The number of arrears is on the rise…
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- Figure 12: Number of mortgages in arrears, H1 1995-H1 2006
- …as are mortgage repossession levels
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- Figure 13: Number of mortgage repossessions, H1 1996-H1 2006
- MPPI volume sales are still in decline
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- Figure 14: New volume sales, new Mortgage Payment Protection Insurance, 1999-2006
- Clampdown on exit fees
- KFIs have increased regulatory costs for lenders
- HIPs to be introduced this year
- HomeBuy is intended to give some a hand onto the property ladder
- Basel II
Competitive Context
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- Rented properties account for a quarter of households
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- Figure 15: Households, by tenancy – UK, 1981-2006
- The private sector rent index suggests a continuing rise in house rents
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- Figure 16: Private sector rent index – England, Q3 1999- Q4 2005
Strengths and Weaknesses
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- Rising interest rates may take steam out of the property market…
- …but the desire to own property will remain strong
Who’s Innovating?
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- Innovation is key to this market
- Affordability is a key issue
- New funding techniques have enabled new lenders to come to the fore
Trade Perspective
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- Product opportunities
- HIPs
- KFIs
- Challenges: present and future
- Other commentary
Market Size and Forecast
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- The total number of mortgages outstanding continues to climb
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- Figure 17: Total number of mortgages outstanding (at year end), 1998-2006
- Soaring house prices continue to push FTBs from the market
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- Figure 18: Number of loans for house purchase, by type of mortgagor, 1999-2006
- The value of mortgage debt continues to grow at a steady pace
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- Figure 19: Total mortgage debt and annual growth rates, 1986-2006
- Average debt rises as house prices continue to climb
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- Figure 20: Average debt per mortgagor, by type of loan, 1999-2006
- Lending secured on dwellings has exceeded expectations
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- Figure 21: Gross and net lending secured on dwellings, 1995-2006
- Total gross advances showed strong growth in 2006
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- Figure 22: Gross advances, by type of lending, 1993-2006
- Remortgaging activity was down slightly in Q3 2006
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- Figure 23: Gross advances, by type of lending, Q1 2003- Q3 2006
- The threat of future rate rises adds to the appeal of fixed-rate mortgages
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- Figure 24: Loans for house purchase, by product type, 1996-2006
- BTL continues to boost overall mortgage market
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- Figure 25: BTL mortgages outstanding, 1999-2006
- The value of MEW took a dip in 2006
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- Figure 26: Value of MEW, 2000-06
- Less impressive growth is expected in the coming years
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- Figure 27: Forecast of gross advances, by type of lending, 2006-11
Market Share
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- Banks lead the mortgage market, but specialist lenders are gaining importance
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- Figure 28: Number of loans approved for house purchase, by type of lender, 1993-2006
- Specialist lenders have increased their share of the business
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- Figure 29: Mortgages, balances outstanding, by type of institution, 1996-2006
- Gross lending at Northern Rock increased by 55% in two years
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- Figure 30: Largest mortgage lenders, by gross mortgage lending, 2003-05
- A refusal to chase unprofitable market share leads to a loss in share for some
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- Figure 31: Changes in share of gross mortgage lending to top ten lenders, 2003-05
- With £201 billion in residential balances outstanding in 2005, HBOS was clearly the market leader
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- Figure 32: Leading mortgage lenders, by residential balances outstanding, 2003-05
- Regarding residential balances outstanding, little has changed in terms of market share
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- Figure 33: Changes in market share, residential balances outstanding, 2003-05
- A summary of gains and losses in market share from 2004-05
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- Figure 34: Percentage point change in market share, top ten providers, 2004-05
Companies and Products
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- Something to suit everyone
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- Figure 35: Examples of types of mortgage product, 2007
- A seemingly endless array of mortgage products
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- Figure 36: Selection of ‘bestselling’ mortgages from moneysupermarket.com, 2006
- A word about endowment mortgages
- Company snapshots
- HBOS
- Abbey
- Lloyds TSB
- Northern Rock
- Nationwide Building Society
- Non-standard borrowers are not left behind
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- Figure 37: Selection of ‘bestselling’ mortgages from moneysupermarket.com, 2007
- Who operates in the non-standard mortgage market
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- Figure 38: Summary of the main providers of non-standard mortgages in the UK, August 2006
- The securitisation of mortgages allows many lenders to operate in the non-standard market
Brand Elements
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- Halifax
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- Figure 39: Words associated with Halifax mortgage brand, March 2007
- Brand qualities
- Recommendations and opportunities
- Abbey
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- Figure 40: Words associated with Abbey mortgage brand, March 2007
- Brand qualities
- Recommendations and opportunities
- Nationwide BS
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- Figure 41: Words associated with Nationwide BS mortgage brand, March 2007
- Brand qualities
- Recommendations and opportunities
- HSBC
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- Figure 42: Words associated with HSBC mortgage brand, March 2007
- Brand qualities
- Recommendations and opportunities
- Northern Rock
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- Figure 43: Words associated with Northern Rock mortgage brand, March 2007
- Brand qualities
- Recommendations and opportunities
- NatWest/RBS
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- Figure 44: Words associated with NatWest/RBS mortgage brand, March 2007
- Brand qualities
- Recommendations and opportunities
- Lloyds TSB
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- Figure 45: Words associated with Lloyds TSB mortgage brand, March 2007
- Brand qualities
- Recommendations and opportunities
- Barclays
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- Figure 46: Words associated with Barclays mortgage brand, March 2007
- Brand qualities
- Recommendations and opportunities
- Usage of brands
- Halifax, Abbey and Nationwide lead the way
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- Figure 47: Consumer usage of various mortgage brands, March 2007
- Attitudes towards brands
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- Figure 48: Attitudes towards mortgage brands, March 2007
- Brand satisfaction and performance
- Former building societies and Nationwide score highly
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- Figure 49: Customer rating of Mortgage brands, Mortgages 2007
- Brand commitment
- Nationwide mortgage holders are keen to recommend the brand
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- Figure 50: Degree of customer commitment to mortgage brands, March 2007
Brand Communication and Promotion
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- Figure 51: Advertising expenditure on financial services, by sector, 2001/02-2005/06
- NU’s adspend on equity release products makes it the leading advertiser of mortgages
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- Figure 52: Advertising expenditure on mortgages and related products, by top ten advertisers, 2001/02-2005/06
- A variety of media outlets are used to promote mortgages
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- Figure 53: Advertising expenditure on mortgages and related products, by media outlet, 2005/06
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Channels to Market
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- Pressure to cut costs has helped to shape the distribution landscape
- The Internet: improving efficiency and access to information
- The distribution landscape is increasing in complexity
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- Figure 54: Mortgage distribution flow chart, January 2007
- Opportunities abound for current account providers
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- Figure 55: Sources of advice, December 2006
- Intermediaries are expected to play an increasingly important role
- From how many sources would consumers seek info?
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- Figure 56: Number of sources consumers would consult for information or advice on arranging a mortgage/remortgage, December 2006
Consumer Financial Activity
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- Testing times for financial services providers
- Activity levels down again
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- Figure 57: Savings, investment, borrowing and debt repayment – consumers’ expected activity, September 2005-December 2006
- UK savings and spending climate
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- Figure 58: UK savings and spending climate – indexed, January 2001-January 2007
- Subdued picture across all sub-groups
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- Figure 59: Expected financial activity, by socio-demographic and income groups, December 2006 and average for the last 20 quarters
- Declining business across the board
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- Figure 60: Leading financial activities planned in the next six months, December 2005-December 2006
- Mortgage providers may have to work harder for revenue
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- Figure 61: Intended mortgage and property purchase activity, December 2004-December 2006
- Identifying main financial services providers
- Abbey customers are the most ‘fairly’ active
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- Figure 62: Activity levels of main financial services providers’ customer bases, December 2006
- Halifax customers are savers
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- Figure 63: Activity intentions and current household financial situation, by MFSP, December 2006
The Consumer – Product Ownership
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- More than one in three adults in the UK have a mortgage
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- Figure 64: Property ownership, December 2006
- Implications and opportunities
- Over a fifth of 18-24s are saving up to buy their first home
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- Figure 65: Property ownership, by gender, age and socio-economic group, December 2006
- Implications and opportunities
- More than half of retired consumers own their home outright
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- Figure 66: Property ownership, by working status and gross annual household income, December 2006
- Implications and opportunities
- Are the Scottish content to remain off the property ladder?
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- Figure 67: Property ownership, by TV region and ACORN category, December 2006
- Implications and opportunities
- Two in three mortgage holders are married
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- Figure 68: Profile of UK mortgage holders, December 2006
- Implications and opportunities
- Two thirds of mortgagees have a repayment mortgage
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- Figure 69: Type of mortgage owned, December 2006
- Implications and opportunities
- ABs are more willing to assume a bit of risk
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- Figure 70: Type of mortgage owned, by gender, age and socio-economic group, December 2006
- Implications and opportunities
- Flexibility is important to those with higher incomes
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- Figure 71: Type of mortgage owned, by working status and gross annual household income, December 2006
- 72% of retired ABs own their property outright
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- Figure 72: CHAID analysis, December 2006
- One in four FTBs would consult the Internet for mortgage advice
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- Figure 73: Mortgage ownership, by sources of information, December 2006
- Implications and opportunities
- Many potential FTBs are keen to do some research before arranging a mortgage
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- Figure 74: Mortgage ownership, by number of sources of information, December 2006
- Implications and opportunities
- Younger people are the most likely to rely on family or friends for mortgage advice
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- Figure 75: Where consumers would go for advice regarding a mortgage or a remortgage, by gender, age and socio-economic group, December 2006
- Implications and opportunities
The Consumer – Switching Activity
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- ABs are the most likely to have switched provider recently
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- Figure 76: ‘I have changed my mortgage/mortgage provider within the last three years’, by gender, age and socio-economic group, December 2006
- Implications and opportunities
- Do endowment holders feel trapped?
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- Figure 77: ‘I have changed mortgage/mortgage provider in the last three years’, by type of mortgage owned, December 2006
- Implications and opportunities
- Who are the likely candidates for remortgaging?
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- Figure 78: ‘I am thinking of changing my mortgage/mortgage provider in the next 12 months or so’, by gender, age and socio-economic group, December 2006
- Implications and opportunities
- Some 17% of those with a repayment mortgage are looking to switch
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- Figure 79: ‘I am thinking about changing my mortgage/mortgage provider in the next 12 months’, by type of mortgage owned, December 2006
- IFAs will be a main source of advice for those thinking about remortgaging
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- Figure 80: ‘I am thinking about changing mortgage provider’, by source of mortgage/remortgage advice, December 2006
- Implications and opportunities
- Rate tarts exist in the mortgage market
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- Figure 81: ‘I am thinking about changing mortgage/mortgage provider in the next 12 months’, by ‘I have changed my mortgage/mortgage provider in the last three years’, December 2006
- Implications and opportunities
- Overall, most customers are satisfied
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- Figure 82: ‘I am satisfied with my current mortgage and mortgage provider’, by gender, age and socio-economic group, December 2006
- Implications and opportunities
- Endowment holders are surprisingly satisfied
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- Figure 83: ‘I am satisfied with my current mortgage/mortgage provider’, by type of mortgage owned, December 2006
- Implications and opportunities
- Levels of satisfaction affect likelihood of switching provider
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- Figure 84: ‘I am satisfied with my current mortgage/mortgage provider’, by ‘I am considering switching mortgage/mortgage provider in the next 12 months’, December 2006
- Implications and opportunities
The Consumer – Attitudes Towards Remortgaging
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- Saving money is a key priority when remortgaging
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- Figure 85: Attitudes towards remortgaging, December 2006
- Implications and opportunities
- Those with young families will need to save money where they can
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- Figure 86: Attitudes towards remortgaging, by gender, age and socio-economic group, December 2006
- Implications and opportunities
- Those with repayment mortgages want to keep loan term to a minimum
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- Figure 87: Attitudes towards remortgaging, by the type of mortgage owned, December 2006
- Even satisfied customers could be tempted by the prospect of saving money
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- Figure 88: Attitudes towards remortgaging by ‘I am thinking of changing my mortgage/mortgage provider in the next 12 months or so’, December 2006
- Borrowers will want terms to suit their needs
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- Figure 89: Attitudes towards remortgaging, by attitudes towards remortgaging, December 2006
- Implications and opportunities
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