Table of Contents
Overview
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- What you need to know
- Products covered in this Report
Executive Summary
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- The market
- Gross lending grew by 4% in 2017
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- Figure 1: Forecast of gross mortgage lending, 2012-22
- Intermediaries distribute two thirds of new mortgages
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- Figure 2: Distribution of regulated mortgage sales, direct versus intermediated, 2012/13-2016/17
- Price growth was subdued in 2017, but rates remain appealing
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- Figure 3: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for 2-year and 5-year fixed-rate mortgages at 75% LTV, 2-year variable-rate mortgage at 75% and standard variable-rate (SVR) mortgage, January 2012-January 2018
- First-time buyers given stamp duty relief
- Companies and brands
- Lloyds is the UK’s largest mortgage lender
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- Figure 4: Top 10 UK mortgage providers, by outstanding mortgage balances at year-end, 2017
- Adspend fell by a fifth in 2017
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- Figure 5: Total above-the-line, online display and direct mail advertising expenditure on mortgages, excluding equity release, 2013-17
- Banks dogged by negative traits, while Post Office and Nationwide flourish
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- Figure 6: Attitudes towards and usage of selected brands, November 2017
- The consumer
- A quarter of consumers have a mortgage
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- Figure 7: Current housing situation, December 2017
- More than half of borrowers have a fixed-rate loan
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- Figure 8: Type of mortgage held, December 2017
- A quarter of mortgages were arranged in the last year
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- Figure 9: Timing of last mortgage, December 2017
- Consumers are optimistic about home buying plans
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- Figure 10: Home buying plans for the next two years, by current housing situation, December 2017
- Interest rates dominate consumers’ choice of lender
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- Figure 11: Factors affecting choice of mortgage lender, December 2017
- Shopping around is generally limited to renewal periods
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- Figure 12: Mortgage shopping around activity, December 2017
- Offers from current lenders are welcome, less so from elsewhere
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- Figure 13: Attitudes towards mortgage switching, December 2017
- What we think
Issues and Insights
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- Rising interest rates will bring opportunities and threats
- The facts
- The implications
- Switching is held back by cost and a lack of understanding
- The facts
- The implications
- At least a fifth of SVR customers would prefer an alternative product
- The facts
- The implications
The Market – What You Need to Know
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- Gross lending grew by 4% in 2017
- Buy-to-let hit hard but remortgages and FTBs continue to grow
- Intermediaries distribute two thirds of new mortgages
- Price growth was subdued in 2017, but rates remain appealing
- First-time buyers given stamp duty relief
Market Size and Forecast
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- Gross lending grew by 4% in 2017
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- Figure 14: Gross mortgage lending, not seasonally adjusted, 2013-17
- Lending forecast to enjoy steady growth in the next five years
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- Figure 15: Forecast of gross mortgage lending, 2012-22
- Figure 16: Forecast of gross mortgage lending, at current and constant prices, 2012-22
- Forecast methodology
Market Segmentation
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- Buy-to-let activity hit hard by regulation changes
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- Figure 17: Volume of new mortgages, by purpose, not seasonally adjusted, 2013-17
- Remortgaging and first-time buyers lead the growth in market value
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- Figure 18: Value of new mortgages, by purpose, not seasonally adjusted, 2013-17
Channels to Market
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- Intermediaries distribute two thirds of new mortgages
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- Figure 19: Distribution of regulated mortgage sales, direct versus intermediated, 2012/13-2016/17
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- Figure 20: Distribution of regulated mortgage sales, advised versus non-advised, 2012/13-2016/17
- Borrowers most likely to say their bank was the main source of advice
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- Figure 21: Sources of mortgage advice used for last mortgage/remortgage, December 2017
Market Drivers
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- Price growth was subdued in 2017
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- Figure 22: Annual change in average UK house prices – ONS and Nationwide house price indices, January 2010-December 2017
- Rates are still borrower-friendly…
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- Figure 23: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for 2-year and 5-year fixed-rate mortgages at 75% LTV, 2-year variable-rate mortgage at 75% and standard variable-rate (SVR) mortgage, January 2012-January 2018
- …but high-LTV borrowers have seen fewer benefits
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- Figure 24: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for 2-year and 5-year fixed-rate mortgages at 95% LTV, January 2014-January 2018
- Building has increased but more homes still needed
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- Figure 25: Number of permanent dwellings started and completed, 2006/07-2016/17
Regulatory and Legislative Changes
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- First-time buyers given stamp duty relief
- FCA’s mortgage market study delayed
- Lifetime ISA launches to a cool welcome
Companies and Brands – What You Need to Know
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- Lloyds is the UK’s largest mortgage lender
- Lenders continue to compete on rates and improve processes
- Adspend fell by a fifth in 2017
- Banks dogged by negative traits, while Post Office and Nationwide flourish
Market Share
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- Lloyds is the UK’s largest mortgage lender
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- Figure 26: Top 10 UK mortgage providers, by outstanding mortgage balances at year-end, 2015-17
- Big six dominate the market
- TSB continues to impress
Competitive Strategies
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- Lenders continue to compete on rates
- Supermarket brands (re)enter the market
- Brands seek to improve the application process
Advertising and Marketing Activity
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- Above-the-line adspend fell again in 2017
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- Figure 27: Total above-the-line, online display and direct mail advertising expenditure on mortgages, excluding equity release, 2013-17
- TV is the increasingly dominant channel for advertising mortgages
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- Figure 28: Total above-the-line, online display and direct mail advertising expenditure on mortgages, excluding equity release, by media type, 2015-17
- Halifax is the biggest advertiser of mortgages in the UK
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- Figure 29: Top 10 advertisers of above-the-line, online display and direct mail advertising expenditure on mortgages, excluding equity release, 2015-17
- Sponsorships help keep brand awareness high
- Nielsen Ad Intel coverage
Brand Research
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- Brand map
- Wider business sees Post Office score high for trust and differentiation
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- Figure 30: Attitudes towards and usage of selected brands, November 2017
- Key brand metrics
- Nationwide is the most likely to provide an excellent experience
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- Figure 31: Key metrics for selected brands, November 2017
- Brand attitudes: Supermarket brands’ customer service is perceived to be poor
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- Figure 32: Attitudes, by brand, November 2017
- Brand personality: Post Office, Nationwide and Santander are the most fun
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- Figure 33: Brand personality – Macro image, November 2017
- Sainsbury’s Bank and Post Office are seen as the most affordable
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- Figure 34: Brand personality – Micro image, November 2017
- Brand analysis
- Major banks still carry behavioural baggage…
- …while challengers long for opportunities to prove trustworthiness
- Post Office tops the chart in most positive attributes
- Nationwide’s success is built on being different
The Consumer – What You Need to Know
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- A quarter of consumers have a mortgage
- More than half of borrowers have a fixed-rate loan
- A quarter of mortgages were arranged in the last year
- Consumers are optimistic about home buying plans…
- …and driven in the pursuit of low rates
- Shopping around is generally limited to renewal periods
- Offers from current lenders are welcome, less so from elsewhere
Mortgage Ownership
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- A quarter of consumers have a mortgage
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- Figure 35: Current housing situation, December 2017
- 35-54s are most likely to be paying a mortgage
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- Figure 36: Current housing situation, by age, December 2017
- Lower earners exposed to later-life rental payments
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- Figure 37: Current housing situation, by gross annual household income, December 2017
Type of Mortgage Held
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- More than half of borrowers have a fixed-rate loan
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- Figure 38: Type of mortgage held, December 2017
- SVRs remain the second most common type of mortgage
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- Figure 39: Type of mortgage held, by age, December 2017
Timing of Last Mortgage Purchase
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- A quarter of outstanding mortgages were arranged in the last year
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- Figure 40: Timing of last mortgage, December 2017
- Half of over-45s have had the same mortgage for more than five years
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- Figure 41: Timing of last mortgage, by age, December 2017
- Four fifths of mortgages arranged in the last year have fixed rates
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- Figure 42: Type of mortgage held, by timing of last mortgage, December 2017
Home Buying Plans
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- Consumers are optimistic about home buying plans
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- Figure 43: Home buying plans for the next two years, by current housing situation, December 2017
- Private renters are by far the most likely to become first-time buyers
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- Figure 44: Home buying plans for the next two years, by current housing situation, not including full-time students or retirees, December 2017
Factors Affecting Choice of Mortgage Lender
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- Interest rates are the key factor in mortgage choice
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- Figure 45: Factors affecting choice of mortgage lender, by home buying plans, December 2017
- Consumers appear to give little thought to worst-case scenarios
- Reputation counts, but it’s not all about the brand
Mortgage Comparison and Switching
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- Most shop around when their loan term ends
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- Figure 46: Mortgage shopping around activity, December 2017
- Proactive engagement is less common…
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- Figure 47: Agreement with selected statements about shopping around for mortgages, by type of mortgage held, December 2017
- …largely due to costly exit fees
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- Figure 48: Agreement with selected statements about shopping around for mortgages, by timing of last mortgage purchase, December 2017
Attitudes towards Mortgage Switching
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- Borrowers are happy to hear from existing providers...
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- Figure 49: Attitudes towards mortgage switching, December 2017
- …but competitors are less welcome
- Shopping around is hard work and difficult to understand
- A significant proportion of SVR mortgage holders need help
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- Figure 50: Attitudes towards mortgage switching, by type of mortgage held, December 2017
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Figure 51: Best- and worst-case forecast of gross mortgage lending, 2017-22
- Forecast methodology
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