Table of Contents
Introduction
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- Market definitions
- Abbreviations
Issues in the Market
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- When will the mortgage market return to “normal”?
- Why are lending criteria still tight?
- How will consumers react to interest rate rises?
- How do consumers feel about the market at present?
- Has the slowdown prompted a new wave of innovation?
Executive Summary
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- The market
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- Figure 1: Forecast of gross mortgage advances, 2005-15
- The market stabilised in 2010
- House purchase loans up, remortgage activity down
- Market factors
- Weak levels of activity, but some improvements
- Regulatory challenges on the horizon
- Economic uncertainty is a major concern for lenders
- Companies, brands and innovation
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- Figure 2: Top six mortgage lenders, by gross advances, 2009 and 2010
- The top six dominate the market
- Mortgage adspend has fallen considerably
- Nationwide is the most trusted brand
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- Figure 3: Attitudes towards and usage of mortgage brands, December 2010
- Innovation concentrated on the FTB sector
- The consumer
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- Figure 4: Property and mortgage ownership, 2006-11
- A third of UK adults have a mortgage
- Homeowners favour fixed rate deals at present
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- Figure 5: House moving and mortgage intentions, January 2011
- People still regard property as a good investment
- What we think
Future Opportunities
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- Capitalising on current market uncertainty
- An opportunity for intermediaries to ‘sell’ advice
Internal Market Environment
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- Key points
- Low interest rates but high margins
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- Figure 6: Bank of England base rate, three-month (monthly average) LIBOR and new mortgages effective rate, Jan 2005-Dec 2010
- Mortgage approvals remain at low levels…
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- Figure 7: Number of mortgage approvals (SA), by type, Jan 2007-Nov 2010
- … as do the number of property transactions
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- Figure 8: Number of £40,000+ UK residential property transactions (SA), Q1 2007-Q3 2010
- Lenders are still demanding higher deposits
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- Figure 9: Mortgage payment as a proportion of income and deposit as a proportion of price, by type of borrower, 1990-2010
- Arrears and repossessions have increased
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- Figure 10: Mortgage arrears and repossessions, Q1 2008-Q3 2010
- Signs that lending criteria are starting to ease
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- Figure 11: Number of mortgage products available, by LTV band, April 2009 vs. April 2010
- Measures to improve liquidity are about to expire
- Schemes to support homeowners
- New intermediary guide launched
- Regulatory issues
- Tighter rules on capital requirements
- The draft European Mortgage Directive
- The Mortgage Market Review
- Concerns about the proposed responsible lending rules
- Concerns about the proposed distribution and disclosure rules
- Enhanced measures to protect customers in arrears
Broader Market Environment
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- Key points
- A flat market may deter new purchase activity
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- Figure 12: Annual house price growth in the UK – comparison of four different sources, Q1 2007-Q3 2010
- Write-offs have fallen back…
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- Figure 13: Quarterly write-offs of secured lending to individuals, Q1 2007-Q3 2010
- … but another rise in unemployment may increase defaults
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- Figure 14: UK unemployment rate, Q1 2005-Q4 2010
- Some homeowners have benefited from low interest rates
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- Figure 15: Trends in statements relating to mortgages and the economic downturn, Feb 2009-Feb 2011
- Spending cuts have dented consumer confidence
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- Figure 16: Monthly, 3-monthly and 12-monthly UK consumer confidence indices, Jan 1982-Dec 2010
- Expected borrowing activity remains at low levels…
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- Figure 17: Savings, investment, borrowing and debt repayment – consumers’ expected activity, June 2002-December 2010
- … as does expected mortgage activity
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- Figure 18: Expected mortgage and property purchase activity, Q3/Q4 2002-Q4 2010/Q1 2011
Competitive Context
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- Key points
- The continued growth of the private rented sector
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- Figure 19: Housing stock in England, by tenure, 1981-2008/09
- Long-term aspirations of home ownership remain high
SWOT Analysis
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- Figure 20: The UK mortgage market – SWOT analysis, 2011
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Who’s Innovating?
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- Key points
- More innovative products aimed at FTBs
- The ‘perfect’ solution from Barclays and Bovis Homes
- Lloyds TSB ‘lends a hand’ to FTBs
- TMW launches a range of guarantor mortgages
- Barratt Homes launches a new proposition with Hitachi Capital
- Switch and fix deals from Barclays and Nationwide
- Barclays tries to tempt people off competitors’ SVR
Market Size and Forecast
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- Key points
- Gross advances stabilised in 2010
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- Figure 21: Gross mortgage advances, 2005-10
- Specialist lenders have been the hardest hit
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- Figure 22: Gross mortgage lending, by type of lender, 2005-10*
- House purchase loans picked up in 2010…
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- Figure 23: Gross mortgage lending, by type of loan, 2005-10
- … although this was not due to increased FTB activity
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- Figure 24: Loans for house purchase, by type of borrower, 2005-10
- Variable rate mortgages have become more popular
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- Figure 25: Type of mortgage held, 2008-10
- Forecast
- Gross advances are expected to stay flat for the time being
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- Figure 26: Forecast of gross mortgage advances, 2005-15
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- Figure 27: Forecast of gross mortgage advances, 2005-15
- Forecast methodology
Market Share
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- Key points
- Top six lenders control more than 70% of the market
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- Figure 28: Top six mortgage lenders, by amounts outstanding, 2009 and 2010
- Lloyds Banking Group leads the market in terms of new lending
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- Figure 29: Top six mortgage lenders, by gross advances, 2009 and 2010
- Tighter lending criteria prompt a decline in switching
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- Figure 30: Proportion of people who have changed their mortgage provider in the last year, 2006-10
Companies and Products
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- Barclays/Woolwich
- HSBC
- Lloyds Banking Group
- Nationwide
- RBS Group
- Santander
Brand Communication and Promotion
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- Key points
- Total sector adspend has halved since 2006/07
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- Figure 31: Total mortgage adspend, by sub-category, 2006/07-2009/10
- Lloyds Banking Group is the biggest advertiser
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- Figure 32: Total mortgage adspend, by company (top 10), 2008/09-2009/10
- A noticeable shift in advertising strategy
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- Figure 33: Total mortgage adspend, by media type, 2006/07-2009/10
- A seasonal market with seasonal advertising
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- Figure 34: Monthly total mortgage adspend, 2009
- Note on adspend data
Brand Research
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- Brand map
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- Figure 35: Attitudes towards and usage of mortgage brands, December 2010
- Brand attitudes
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- Figure 36: Attitudes towards mortgage brands, December 2010
- Brand personality
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- Figure 37: Mortgage brand personality – macro image, December 2010
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- Figure 38: Mortgage brand personality – micro image, December 2010
- Correspondence analysis
- Brand experience
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- Figure 39: Mortgage brand usage, December 2010
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- Figure 40: Satisfaction with various mortgage brands, February 2010
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- Figure 41: Consideration of mortgage brands, December 2010
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- Figure 42: Consumer perceptions of current mortgage brand performance, December 2010
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- Figure 43: Mortgage brand recommendation – Net Promoter Score, December 2010
- Brand index
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- Figure 44: Mortgage brand index, December 2010
- Figure 45: Mortgage brand index vs. recommendation, December 2010
- Target group analysis
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- Figure 46: Target groups, December 2010
- Figure 47: Mortgage brand usage, by target groups, December 2010
- Group One – The Conformists
- Group Two – Simply the Best
- Group Three – Shelf Stalkers
- Group Four – Habitual Shoppers
- Group Five – The Individualists
Channels to Market
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- Key points
- The squeeze on intermediaries continues…
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- Figure 48: Proportional distribution of regulated mortgage sales, by channel, 2006/07-2009/10
- … with the number of firms having fallen significantly
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- Figure 49: Number of mortgage/home finance appointed representatives and directly authorised intermediary firms, by type, Sep 2006-Sep 2010
- The impact of the FSA’s recent MMR proposals
- TGI data confirms the growth of direct sales
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- Figure 50: Method used to arrange last mortgage, 2006-10
Property Ownership and Buying Intentions
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- Key points
- A third of UK adults have a mortgage
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- Figure 51: Property and mortgage ownership, 2006-11
- Mortgage ownership is most common amongst 35-54-year-olds
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- Figure 52: Property ownership, by demographics, January 2011
- More young people are saving for their first home
- Affluence is directly related to mortgage penetration
Expected House Price Movement
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- Key points
- Expectations of a flat or declining market in 2011
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- Figure 53: Expected house price growth, January 2011
- Potential buyers are most likely to anticipate growth
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- Figure 54: Expected house price growth, by property ownership and buying intentions, January 2011
- Older consumers are more negative about house prices
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- Figure 55: Most popular expected house price growth, by age and socio-economic group, January 2011
Future Moving Plans
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- Key points
- Half of all homeowners have no plans to move
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- Figure 56: House moving and mortgage intentions, January 2011
- Potential movers envisage declining house prices
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- Figure 57: Expected house price growth, by house moving and mortgage intentions, January 2011
- Fixed rate deals more popular than tracker/variable deals
- Younger homeowners prefer fixed rate mortgages
Attitudes Towards Property and the Mortgage Market
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- Key points
- Most think property is still a good long-term investment…
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- Figure 58: Attitudes towards property and the mortgage market, January 2011
- … with older people being particularly positive
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- Figure 59: Attitudes towards property and the mortgage market, by demographics, January 2011
- Engaging with younger consumers
- Wealthy professionals most likely to overpay their mortgage
- Non-homeowners are jittery in the current climate
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- Figure 60: Attitudes towards property and the mortgage market, by property ownership and buying intentions, January 2011
- Growth in house prices linked to mortgage market conditions
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- Figure 61: Attitudes towards property and the mortgage market, by expected house price movement, January 2011
- Proactively targeting potential movers
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- Figure 62: Attitudes towards property and the mortgage market, by house moving intentions, January 2011
Targeting Opportunities
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- Key points
- Methodology
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- Figure 63: Target groups, January 2011
- The over-optimistic Hopeful Minority?
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- Figure 64: Expected house price movement, by target groups, January 2011
- The Neutrals are confident in their own financial situation
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- Figure 65: Attitudes towards property and the mortgage market, by target groups, January 2011
- The Hopeful Minority are more likely to consider buying
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- Figure 66: Property ownership and buying intentions, by target groups, January 2011
- The Neutrals are least likely to consider moving
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- Figure 67: House moving and mortgage intentions, by target groups, January 2011
- Young adults are trying to be optimistic
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- Figure 68: Target groups, by demographics, January 2011
Appendix – Forecast
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- Figure 69: Forecast of gross mortgage advances – worst and best case scenarios, 2010-15
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Appendix – Market Share
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- Figure 70: Lenders’ share of the mortgage market, by amounts outstanding, 2008 and 2009
- Figure 71: Lenders’ share of the mortgage market, by gross advances, 2008 and 2009
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Appendix – Property Ownership and Buying Intentions
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- Figure 72: Property ownership and buying intentions, January 2011
- Figure 73: Property ownership and buying intentions, by demographics, January 2011
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- Figure 74: Property ownership and buying intentions, by demographics, January 2011 (continued)
- Figure 75: Property ownership and buying intentions, by demographics, January 2011 (continued)
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Appendix – Expected House Price Movement
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- Figure 76: Expected house price movement, by demographics, January 2011
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Appendix – Future Moving Plans
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- Figure 77: House moving and mortgage intentions, by demographics, January 2011
- Figure 78: House moving and mortgage intentions, by demographics, January 2011 (continued)
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- Figure 79: House moving and mortgage intentions, by demographics, January 2011 (continued)
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Appendix – Attitudes Towards Property and the Mortgage Market
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- Figure 80: Attitudes towards property and the mortgage market, by demographics, January 2011
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Appendix – Targeting Opportunities
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- Figure 81: Target groups, by demographics, January 2011
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