Table of Contents
Issues in the Market
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- Key issues
- Abbreviations
Future Opportunities
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- Evidence of pent-up demand in the market
- Young people may benefit from the current conditions
- Changing distribution patterns
Market in Brief
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- The outlook remains bleak…
- … as consumer confidence falls and unemployment rises
- Competition from the rental market
- Gross mortgage lending fell by almost a third in 2008
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- Figure 1: Total mortgage lending, gross and net advances, 2000-08
- Fixed rate mortgages are the most popular choice
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- Figure 2: Mortgage ownership, by product type, 2004-08
- HBOS is the market leader
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- Figure 3: Market share of top 20 mortgage providers, by gross advances, 2007
- Intermediaries have been hard hit by the downturn
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- Figure 4: Distribution of gross advances, by channel type, 2007
- A third of people have a mortgage outstanding on their home…
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- Figure 5: Property ownership, January 2009
- … and most still think property is a good long-term investment
Internal Market Environment
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- Key points
- The number of housing transactions has fallen
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- Figure 6: Number of UK property transactions with a value of £40,000 upwards (seasonally adjusted), Q2 2005-Q3 2008
- Repossessions have increased…
- … encouraging the government to step in
- Liquidity remains a major constraint
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- Figure 7: Rolling 3-month average LIBOR vs BoE base rate, Jan 2003-Jan 2009
- Rescue package number two on the horizon
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- Figure 8: UK rescue package*, February 2009
- A new era of tighter regulation in the future?
- The end of 100%+ mortgages?
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- Figure 9: Residential loans to individuals*, by LTV ratio, Q3 2007 vs Q3 2008
- Figure 10: Number of mortgage products available, February 2008 vs March 2009
Broader Market Environment
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- Key points
- House prices continue to decline…
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- Figure 11: Average house prices, Jan 2007-Jan 2009 (monthly data, seasonally adjusted)
- …though some are optimistic about signs of recovery
- Consumer confidence has fallen sharply…
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- Figure 12: UK Consumer confidence, major indices, May 2004-January 2009*
- …as more households struggle to make ends meet
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- Figure 13: Households’ current financial position, Q4 2007-Q4 2008
- Demand for mortgages remains subdued
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- Figure 14: Expected mortgage and property purchase activity, Q3/Q4 2002-Q4 2008/Q1 2009
- Base rate drops to an all-time low…but also offers opportunities
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- Figure 15: Bank of England base rate, January 2000-February 2009
- Unemployment looks set to increase further in 2009
- Housing transactions fall sharply
Competitive Context
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- Key points
- Changing aspirations of home ownership?
- Owner-occupancy has remained static since 2000
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- Figure 16: Number of households in England and Wales, by tenure, 1981-2007
- Sale and rent back potentially impacts the market
Strengths and Weaknesses in the Market
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- Market strengths
- Evidence of rising pent-up demand
- Houses becoming more affordable for FTBs
- Stamp duty threshold has been increased
- An emphasis on direct sales reduces costs for lenders
- Market weaknesses
- Falling house prices deter potential buyers
- Liquidity continues to be a problem
- Arrears, repossessions and bad debts are rising
- Tighter lending criteria restrict loan availability
Who’s Innovating?
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- Key points
- Lenders focusing on risk and pricing – little innovation at present
- HSBC launches the Rate Matcher mortgage
- Helping FTBs get on the property ladder… in Ireland
- Britannia opts for a more flexible approach
- Lloyds TSB launches a product tied to its Olympic sponsorship
Trade Perspective
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- Demand remains subdued…
- … as does supply
- A good time for people remortgaging
- Contraction in the market and little innovation
- House prices and consumer confidence remain key
- The low base rate is squeezing margins
- Future prospects for the market
Consumer Perspective
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- The slowdown – not always bad for mortgage owners…
- …and great for debt repayment
- Forced landlords and negative equity
- The battle between fixed and tracker rates
- Which way for house prices?
Market Size and Forecast
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- Key points
- Number of mortgage accounts declines slightly in 2008
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- Figure 17: Total number of mortgage accounts, 1997-2008
- Total mortgage debt stands at over £1.2 trillion
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- Figure 18: Total mortgage debt (amounts outstanding at year end), 2000-08
- Net lending down by two thirds in 2008
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- Figure 19: Total mortgage lending, gross and net advances, 2000-08
- New loans for house purchase have been particularly hard hit
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- Figure 20: Number of mortgage approvals, by type of mortgage, Jan 2006-Dec 2008 (monthly data, seasonally adjusted)
- Remortgages now account for over half of gross advances
- Home-movers account for three fifths of house purchase loans
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- Figure 21: Loans advanced for house purchase, by type of borrower, 2002-08
- Buy-to-let growth has slowed
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- Figure 22: Number and value of buy-to-let mortgages outstanding, 2000-08
- Market forecast
- A slow recovery expected from 2010
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- Figure 23: Forecast of total gross advances (at current prices), 2003-13
- The remortgage market may hold up better in 2009
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- Figure 24: Forecast of gross advances, by type of loan (at current prices), 2003-13
- Factors used in the forecast
Market Segmentation
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- Key points
- Fixed rate mortgages are the product of choice for most…
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- Figure 25: Mortgage ownership, by product type, 2004-08
- …although trackers have become more popular recently
- Changing landscape affects margins
Market Share
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- Key points
- Banks benefit from specialist lenders pulling out of the market
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- Figure 26: Gross advances, by type of lender, Jan 2007-Dec 2008 (monthly data, seasonally adjusted)
- Abbey performed well in 2008…
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- Figure 27: UK gross and net mortgage lending of key providers, 2008
- …as did Barclays, outperforming its competitors on net lending
- The disappearance of Northern Rock
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- Figure 28: Secondary lenders results and balances, 2008
- HBOS led the market in 2007
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- Figure 29: Market share of top 20 mortgage providers, by gross advances, 2007
- Winners and losers – predictions for 2009
Companies and Products
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- Key points
- Navigating the mortgage maze
- Consolidation and contraction within the market
- Scaling back lending and cherry-picking customers
- Company snapshots
- HBOS
- Abbey
- Lloyds TSB (Lloyds Banking Group)
- Nationwide
- Other developments in the market
Brand Elements
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- Brand map
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- Figure 30: Attitudes towards and usage of various mortgage brands, January 2009
- Nationwide
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 31: Attitudes towards the Nationwide brand, January 2009
- Barclays
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 32: Attitudes towards the Barclays brand, January 2009
- Abbey
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 33: Attitudes towards the Abbey brand, January 2009
- Halifax
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 34: Attitudes towards the Halifax brand, January 2009
- Brand qualities of mortgage brands
- Mortgage brands – profit over personality?
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- Figure 35: Personalities of various mortgage brands, January 2009
- Halifax has the highest usage levels
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- Figure 36: Consumer usage of various mortgage brands, January 2009
- Nationwide has the highest consideration
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- Figure 37: Consideration of various mortgage brands, January 2009
- Halifax – falling behind, falling from grace?
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- Figure 38: Momentum of various mortgage brands, January 2009
- Lloyds TSB and Nationwide lead on brand satisfaction
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- Figure 39: Satisfaction with various mortgage brands, January 2009
- Nationwide has highest loyalty, Halifax lowest recommendation
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- Figure 40: Commitment to various mortgage brands, January 2009
- Round-up
Brand Communication and Promotion
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- Key points
- Mortgages adspend has gradually decreased since 2005…
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- Figure 41: Top ten categories of financial services adspend, 2005-08
- …and fell significantly in 2008
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- Figure 42: Top ten sub-categories of mortgages adspend, 2005-08
- Northern Rock’s mortgage adspend falls to zero in 2008
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- Figure 43: Top 20 advertisers of mortgages, by adspend, 2005-08
- A more balanced advertising strategy has emerged
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- Figure 44: Total mortgages adspend, by media type, 2008
Channels to Market
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- Key points
- Current account providers have a big advantage
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- Figure 45: Sources of information and advice used for arranging a mortgage, January 2009
- TGI data show direct arrangement is most popular
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- Figure 46: Mortgage ownership, by method of arrangement, 2002-08
- Intermediaries dominated the market in 2007
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- Figure 47: Distribution of gross advances, by channel type, 2007
The Consumer – Ownership and Expectations
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- Key points
- Where now for first-time buyers?
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- Figure 48: Property ownership, January 2009
- The buy-to-let generation re-thinks their options
- Plenty of younger people on the ladder – and plenty wanting to join them
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- Figure 49: Property ownership, by age, January 2009
- Selling to the better-off
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- Figure 50: Property ownership, by socio-economic group, January 2009
- Clearing debts before retirement
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- Figure 51: Property ownership, by lifestage, January 2009
- The boom is well and truly over
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- Figure 52: Expected growth in house prices, January 2009
- Irrational exuberance turns to rational pessimism
- A new approach to dinner party conversations
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- Figure 53: Expected growth in house prices, by socio-economic group, January 2009
- High income, more worries
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- Figure 54: Expected growth in house prices, by household income, January 2009
- Not much optimism among younger people
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- Figure 55: Expected growth in house prices, by age, January 2009
- Homeowners no more optimistic than the general public
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- Figure 56: Expected growth in house prices, by property ownership, January 2009
The Consumer – Attitudes and Advice
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- Key points
- The love affair isn’t dead yet
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- Figure 57: Attitudes towards buying property and the housing market, January 2009
- PR problems ahead?
- Collateral damage for lenders?
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- Figure 58: Attitudes towards buying property and the housing market, by gender and age, January 2009
- Key customers the most suspicious
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- Figure 59: Attitudes towards buying property and the housing market, by socio-economic group and lifestage, January 2009
- Potential buyers shut out of the market
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- Figure 60: Attitudes towards buying property and the housing market, by property ownership, January 2009
- Disintermediation isn’t just for lenders
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- Figure 61: Sources of information and advice used for arranging a mortgage, January 2009
- Mortgage-holders particularly reliant on the banks
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- Figure 62: Sources of information and advice used for arranging a mortgage, by property ownership, January 2009
- Building word of mouth for future customers
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- Figure 63: Sources of information and advice used for arranging a mortgage, by age, January 2009
- A broad base of opinion
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- Figure 64: Sources of information and advice used for arranging a mortgage, by socio-economic group, January 2009
The Consumer – Targeting Opportunities
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- Key points
- Most are happy with their mortgage
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- Figure 65: Mortgage switching behaviour, January 2009
- Potential switchers – still about flexibility, not rate
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- Figure 66: Mortgage switching behaviour cross-analysis, January 2009
- Mobile – and flexible
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- Figure 67: Mortgage switching behaviour, by socio-economic group, January 2009
- Re-educating younger customers
The Consumer – Further Analysis
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- Key points
- Apathetic versus savvy consumers
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- Figure 68: Number of different sources of mortgage advice used, January 2009
- Attitudinal groups identified
- Group 1: Put-off Consumers
- Group 2: Confident High Earners
- Group 3: Apathetic Young and Olds
- Group 4: Concerned Third Agers
- Confident High Earners still believe in property
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- Figure 69: Attitudinal groups, by attitudes towards the housing market, January 2009
- Concerned Third Agers spy a buying opportunity
- Confident High Earners more likely to be ABs
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- Figure 70: Demographic characteristics of attitudinal groups, January 2009
- Confident Third Agers more likely to seek professional advice
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- Figure 71: Attitudinal groups, by sources of mortgage advice used, January 2009
- Concerned Third Agers are the most pessimistic
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- Figure 72: Attitudinal groups, by house price growth expectations, January 2009
- Confident High Earners more inclined to switch provider
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- Figure 73: Attitudinal groups, by house price expectations, January 2009
Appendix
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- Property ownership and mortgage holdings
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- Figure 74: Property ownership, by demographic group, January 2009
- Price expectations
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- Figure 75: Property price expectations, by demographic group, January 2009
- Attitudes towards buying property
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- Figure 76: Attitudes towards buying property and the housing market, by gender and age, January 2009
- Figure 77: Attitudes towards buying property and the housing market, by socio-economic group and lifestage, January 2009
- Figure 78: Attitudes towards buying property and the housing market, by marital status and special group, January 2009
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- Figure 79: Attitudes towards buying property and the housing market, by working status and household income, January 2009
- Figure 80: Attitudes towards buying property and the housing market, by region, January 2009
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- Figure 81: Attitudes towards buying property and the housing market, by newspaper readership and internet usage, January 2009
- Mortgage switching behaviour
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- Figure 82: Mortgage switching behaviour, by demographic group, January 2009
- Sources of advice
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- Figure 83: Key sources of information and advice used for arranging a mortgage, January 2009
- Attitudinal groups
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- Figure 84: Demographic characteristics of attitudinal groups, January 2009
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