The housing and mortgage markets have both shown signs of strong recovery in 2013. Gross mortgage lending increased by almost a quarter during this period, as a number of market factors and developments helped to reignite consumer demand. Improving economic conditions has seen consumer confidence return to the market, while the Funding for Lending Scheme helped to increase lending as market liquidity improved. In addition, Help to Buy was also launched by the government, providing a boost to the first-time buyer market and driving competition for higher loan to value loans.

Although gross lending is expected to increase in 2014, the mortgage market is still facing some challenges. The implementation of the Mortgage Market Review could see some borrowers shut out of the market, and will also put some pressure on lenders to readjust their offerings. In addition, new home building completions remain relatively low which has restricted supply and could lead to an overheating of the housing market. Over the long term, lenders face the challenge of addressing the risks created by interest-only mortgages and need to ensure that they are following the strategies set out by the FCA to help consumers who could face a mortgage shortfall.

This report examines the residential mortgage market, analysing some of the key developments in this sector including wider economic trends and regulatory challenges. This report also provides a snapshot of mortgage lending levels, including a market forecast which shows expected growth in gross lending over the next five years. Mintel’s exclusive commission research concludes the report, looking at product ownership, issues in the interest-only sector, appetite for mortgages over the next 12 months and general consumer attitudes towards mortgages.

Market definitions

The main sectors within the secured lending market are:

  • Mortgage – a loan for house purchase secured against the property. This category includes lending to first-time purchasers, existing borrowers transferring their existing mortgage to another property and lending for buy-to-let purposes.

  • Re-mortgage – this is where a mortgage borrower redeems his/her existing mortgage with their current lender and takes out a new mortgage on the same property with a different lender.

  • Further advance – a form of additional borrowing offered by lenders to their existing mortgage customers for the purposes of home improvements or to buy a car etc. By taking out a further advance, a borrower is increasing their overall mortgage debt with the same lender.

Types of mortgage based on method of repayment:

  • Repayment mortgage – this is where the borrower pays off both the amount borrowed (ie capital) and the interest charged each month.

  • Interest-only mortgage – this is where the borrower pays off the interest charged on the loan, but not the capital. Consequently, the borrower will still need to pay off the original loan at the end of the term, for example by using an investment scheme.

Types of mortgage based on interest rate:

  • Fixed rate – the interest payments are fixed for a set period of time, after which the borrower will be moved on to another rate, such as the lender’s standard variable rate.

  • Standard variable rate (SVR) – the interest varies with the lender’s mortgage rate.

  • Tracker rate – the interest rate moves up or down by tracking an external rate, such as the Bank of England base rate or LIBOR.

  • Discounted rate – the interest rate varies with the lender’s standard variable rate, but the rate is also discounted for a set period of time.


AER Annual Equivalent Rate
APR Annual Percentage Rate
C&G Cheltenham & Gloucester
CML Council of Mortgage Lenders
EU European Union
EC European Commission
FCA Financial Conduct Authority
FLS Funding for Lending Scheme
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