Mortgages - UK - March 2015

INTRODUCTION
Market Definitions
The main sectors within the secured lending market are:
Types of mortgage based on method of repayment:
Types of mortgage based on interest rate:
Abbreviations
EXECUTIVE SUMMARY
The market
Rate of growth for gross mortgage advances starts to slow, but remains strong
Figure 1: Forecast of gross mortgage lending, 2009-19
2014 was a year of regulatory change for the mortgage industry
Consumers are beginning to feel the effects of economic growth
Housing features strongly on the political agenda
Tax reform cuts costs for home buyers
The lending market is becoming increasingly competitive
Housing market conditions
Average house prices continue to increase
Figure 2: Annual change in average UK house price – Comparison of four sources, Q1 2007-Q4 2014
MMR results in a drop in the number of mortgage approvals
Figure 3: Number of quarterly mortgage approvals seasonally adjusted, by type, Q1 2007-Q3 2014
Number of property transactions continues to grow but rate of growth is slowing
Figure 4: Number of residential property transaction completions with value £40,000 or above, Q1 2007-Q4 2014
Record low inflation has limited the likelihood of an interest rate rise
Figure 5: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for 2 year variable rate mortgage and 2 year fixed-rate mortgage both at 75% loan to value, January 2008-December 2014
Conditions improved for first-time buyers in 2014
Companies, brands and innovation
Top six lenders account for 71% of all new lending
Figure 6: Top six mortgage lenders, by gross advances, 2014
High-street lenders benefit from greater exposure
Figure 7: Attitudes towards and usage of selected brands, December 2014
The consumer
Mortgage ownership
Figure 8: Mortgage ownership December 2014
Type of mortgage owned
Figure 9: Type of mortgage held, December 2014
Affordability of mortgages for renters
Figure 10: Renter attitudes towards property ownership and mortgages, December 2014
Mortgage owner purchasing experiences
Figure 11: Consumer opinions on the mortgage purchasing experience, December 2014
Mortgage owner attitudes towards mortgage costs and availability
Figure 12: Mortgage owner attitudes towards mortgage costs and availability, December 2014
Consumer awareness and understanding of regulatory changes
Figure 13: Consumer awareness of MMR regulatory changes, December 2014
Consumer mortgaging and re-mortgaging intentions
Figure 14: Consumers’ likelihood to take out a mortgage/re-mortgage in the next 12 months, December 2014
What we think
ISSUES AND INSIGHTS
Regulation confusion is damaging to consumer sentiment
Issues
Implications
Tighter restrictions disproportionately affect self-employed and single consumers
Issues
Implications
Rent to Buy could help those struggling to afford the urban lifestyle
Issues
Implications
TREND APPLICATION
Greater focus on advice gives mortgage providers an opportunity to build trust
Greater collaboration between savings providers and mortgage lenders could boost consumer sentiment
Mintel Futures: Brand Intervention
MARKET DRIVERS
Key points
2014 was dominated by regulation
Homebuilding rates remain low, despite slight pick-up in 2013/14
Figure 15: Number of new builds for all types of tenure, 2005-14
Improving economic conditions could boost consumer sentiment
Stamp duty reform cuts costs for the majority of buyers
Figure 16: Residential land or property stamp duty land tax rates and thresholds from 4 December 2014
Activity at the end of 2014 suggests a more competitive year ahead for mortgage lenders
THE HOUSING MARKET
Key points
Average house prices continue to grow strongly
Figure 17: Annual change in average UK house price – Comparison of four sources, Q1 2007-Q4 2014
Drop in number of mortgage approvals following implementation of Mortgage Market Review
Figure 18: Number of quarterly mortgage approvals seasonally adjusted, by type, Q1 2007-Q3 2014
Number of repossessions and arrears remains low in 2014
Slowdown in rate of growth for property transactions
Figure 19: Number of residential property transaction completions with value £40,000 or above, Q1 2007-Q4 2014
Mortgage borrowers are feeling the benefit of low base rates
Figure 20: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for 2 year variable rate mortgage and 2 year fixed-rate mortgage both at 75% loan to value, January 2008-December 2014
Many are still concerned about the impact of an interest rate rise on their finances
Figure 21: Consumers’ assessment of the impact of an interest rise on their finances, December 2014
Conditions are improving for first-time buyers
SWOT ANALYSIS
Figure 22: UK mortgage market, SWOT analysis, 2015
WHO’S INNOVATING?
Key points
TSB offers the best of both worlds
HSBC seeks to speed up the mortgage application process
Barclays cuts costs for first-time buyers
The opportunity to help ‘Mortgage Prisoners’
MARKET SIZE AND FORECAST
Key points
Consistent growth in both gross lending and net advances
Figure 23: Total secured lending, by gross and net advances (not seasonally adjusted), 2008-14
Redemptions and regular repayments climb back up
Figure 24: Mortgage repayments, by type (not seasonally adjusted), 2008-14
Continued growth in gross mortgage lending expected over the next five years
Figure 25: Forecast of gross mortgage lending, 2009-19
Figure 26: Forecast of gross mortgage lending, at current and constant prices, 2009-19
Forecast methodology
Fan chart explanation
SEGMENT PERFORMANCE
Key points
Banks continue to dominate the market
Figure 27: Gross mortgage lending, by type of lender (not seasonally adjusted), 2007-14
New lending outstrips re-mortgage business
Figure 28: Gross mortgage lending, by type of loan, 2007-14
A recovery in the first-time buyer market
Figure 29: Loans advanced for house purchase, by type of borrower, 2007-14
CHANNELS TO MARKET
Key points
Growing proportion of intermediated sales
Figure 30: Proportional distribution of regulated mortgage sales, by channel, 2009/10-13/14
Almost eight in 10 mortgages sold on an advised basis
Figure 31: Distribution of regulated mortgage sales, advised versus non-advised, 2009/10-2013/14
MARKET SHARE
Key points
Six lenders account for 71% of all new lending
Figure 32: Top six mortgage lenders, by gross advances, 2012-14
COMPANIES AND PRODUCTS
Barclays
Gross mortgage lending
Relevant brands and subsidiaries
Mortgage product range
Distribution channels
Key financial data
Figure 33: Key financial data for Barclays PLC, 2013-14
Recent activity
HSBC
Gross mortgage lending
Relevant brands and subsidiaries
Mortgage product range
Distribution channels
Key financial data
Figure 34: Key annual financial data for HSBC Bank PLC, 2013 and 2014
Recent activity
Lloyds Banking Group
Gross mortgage lending
Relevant brands and subsidiaries
Mortgage product range
Distribution channels
Key financial data
Figure 35: Key financial data for Lloyds Banking Group 2013-14
Recent activity
Nationwide
Gross mortgage lending
Relevant brands and subsidiaries
Mortgage product range
Distribution channels
Key financial data
Figure 36: Key financial data for Nationwide 2013 and 2014
Recent activity
RBS/NatWest
Gross mortgage lending
Relevant brands and subsidiaries
Mortgage product range
Distribution channels
Key financial data
Figure 37: Key financial data for RBS Group 2013-14
Recent activity
Santander
Gross mortgage lending
Relevant brands and subsidiaries
Mortgage product range
Distribution channels
Key financial data
Figure 38: Key financial data for Santander UK 2013 and 2014
Recent activity
BRAND COMMUNICATION AND PROMOTION
Key points
Spending on mortgage advertising falls but is still considerably higher than post-crisis expenditure
Figure 39: Total advertising expenditure and services, 2009/10-2013/14
Brand building dominates advertising expenditure
Figure 40: Advertising expenditure on mortgage products and services, by sub-category, 2009/10-2013/14
TSB spends to establish itself in the market
Figure 41: Advertising expenditure on mortgage products and services, by top 15 advertisers, 2009/10-2013/14
Decreasing influence of the press
Figure 42: Proportional distribution of mortgage adspend, by media type, 2009-14
A note about adspend
BRAND RESEARCH
What you need to know
Brand map
Figure 43: Attitudes towards and usage of selected brands, December 2014
Key brand metrics
Figure 44: Key metrics for selected brands, December 2014
Brand attitudes: Tesco Bank’s Clubcard appear to boost loyalty associations
Figure 45: Attitudes, by brand, December 2014
Brand personality: Santander has stronger perception of vibrancy than others
Figure 46: Brand personality – Macro image, December 2014
Barclays still has negative associations compared to other brands
Figure 47: Brand personality – Micro image, December 2014
Brand analysis
Nationwide performs strongly across metrics with particular strength in trust
Figure 48: User profile of Nationwide, December 2014
Tesco Bank has perceptions of accessibility and customer service
Figure 49: User profile of Tesco Bank, December 2014
Yorkshire Building Society shares similar benefits to Nationwide
Figure 50: User profile of Yorkshire Building Society, December 2014
Santander uses advertising to boost upbeat connotations
Figure 51: User profile of Santander, December 2014
Barclays maintains quality perception despite negative press
Figure 52: User profile of Barclays, December 2014
NatWest has particular strength among younger adults
Figure 53: User profile of NatWest, December 2014
HSBC has bias towards higher income groups
Figure 54: User profile of HSBC, December 2014
Lloyds Bank has greater consistency across income bands
Figure 55: User profile of Lloyds Bank, December 2014
John Charcol has an element of exclusivity and authority as mortgage specialist
Figure 56: User profile of John Charcol, December 2014
London & Country has lower perception of exclusivity but still lacks awareness
Figure 57: User profile of London & Country, December 2014
The Co-operative Bank has lost trust but maintains element of social responsibility
Figure 58: User profile of The Co-operative Bank, December 2014
MORTGAGE OWNERSHIP
Key points
Ownership levels continue to be restricted by economic and demographic factors
Figure 59: Mortgage Ownership, December 2013 vs. December 2014
Low ownership levels amongst young and old consumers highlight concentration of the target market
Figure 60: Mortgage owners, by age, December 2014
Income has a significant influence on mortgage ownership
Figure 61: Mortgage owners, by gross annual household income, December 2014
Affordability criteria limit options for single households
Figure 62: Mortgage ownership, by current marital status, December 2014
TIMING OF LAST MORTGAGE PURCHASE
Key points
Impact of the credit crisis clearly evident in mortgage purchase timings
Figure 63: Timeframe of mortgage purchase, December 2014
Regulations restrict access to mortgages for self-employed consumers
Figure 64: Mortgage ownership by employment status, and proportion of mortgages taken out by employment status, December 2014
TYPE OF MORTGAGE HELD
Key points
Uncertainty about interest rate rises and favourable rates increase the popularity of fixed-rate mortgages
Figure 65: Type of mortgage held, December 2013 vs. December 2014
Implementation of the MMR and tighter restrictions on interest only mortgages does little to alleviate confusion
Regulatory focus on interest-only could bring ownership levels down
AFFORDABILITY OF MORTGAGES FOR RENTERS
Key points
Many renters feel that they will never be able to afford their own home
Figure 66: Renter attitudes towards property ownership and mortgages, December 2014
Helping young consumers save for a deposit could be the key to increasing prospects
Figure 67: Agreement with the statement ‘I am currently saving for a deposit on my first home,’ by age, December 2014
…this includes preventing the development of pessimistic attitudes
Figure 68: Mortgage intentions of renters, by other mortgage intentions of renters, December 2014
Figure 69: Mortgage intentions of current renters, by attitudes towards home purchasing, December 2014
THE MORTGAGE PURCHASE EXPERIENCE
Key points
Most mortgage/re-mortgage purchasing experiences over the past five years have been positive
Figure 70: Consumer opinions on the mortgage purchasing experience, December 2014
Majority of consumers feel that they had adequate choice when taking out their mortgage
Understanding of mortgage transactions is high
70% say they understand what to do if payment becomes difficult
More mortgage owners understood charges and fees than thought they were fair
MORTGAGE OWNER ATTITUDES TOWARDS MORTGAGE COSTS AND AVAILABILITY
Key points
Low savings rates encourage early repayments
Figure 71: Agreement with statements about mortgage costs and availability, December 2014
A fifth are reliant on introductory deals and fixed-rates
The risk posed by the MMR to the re-mortgage market
CONSUMER AWARENESS AND UNDERSTANDING OF REGULATORY CHANGES
Key points
Consumer awareness and understanding of the MMR regulations is low
Figure 72: Awareness and understanding of new mortgage regulations, December 2014
Misunderstanding of regulations undermines consumer confidence
Figure 73: Agreement with the statement ‘I don’t think I’ll ever be able to afford to buy my own home’ by awareness and understanding of new mortgage regulations, December 2014
CONSUMER MORTGAGING AND RE-MORTGAGING INTENTIONS
Key points
Majority of consumers unlikely to take out a new mortgage within the next 12 months
Figure 74: Likelihood to take out a mortgage in the next 12 months, December 2014
Figure 75: Selected demographics by unlikelihood to take out a mortgage/re-mortgage in the next 12 months, December 2014
More than half of all current mortgage holders do not intent to re-mortgage in the next year
Figure 76: Mortgage ownership by mortgage/re-mortgage intentions of the next 12, December 2014
Mortgage seekers are most aware of regulatory change
Figure 77: Likelihood to take out a mortgage within the next 12 months, by awareness and understanding of new mortgage regulations, December 2014
Mortgage lenders have a relatively small group of potential new customers
Figure 78: Likelihood of current renters to take out a mortgage in the next 12 months, December 2014
APPENDIX
Annual and quarterly mortgages approvals data
Figure 79: Number of quarterly mortgage approvals seasonally adjusted, by type, Q1 2007-Q3 2014
Figure 80: Number of Annual mortgage approvals seasonally adjusted, by type, 2013-14
Market size and forecast
Figure 81: Best and worst case forecast of gross mortgage lending, 2009-2019