Mortgages - UK - March 2016

OVERVIEW
What you need to know
EXECUTIVE SUMMARY
The market
Gross mortgage lending expected to reach £336 billion in 2020
Figure 1: Forecast of gross mortgage lending, 2010-20
Companies and brands
Smaller lenders make good progress but traditional names dominate
Figure 2: Leading residential mortgage providers, market share by gross new mortgage lending, 2015
Traditional banks succeed despite profiteering image
Figure 3: Attitudes towards and usage of selected finance brands, November 2015
The consumer
A third of people hold a mortgage on their main home
Figure 4: Mortgage ownership, December 2015
Expectation of a rise in interest rates have driven fixed-rate mortgage sales in the last year
Fear of interest rate rise encourages uptake of fixed rate mortgages
Figure 5: Type of mortgage held, December 2015
Few are confident that their mortgage is the best option for them
Figure 6: Satisfaction with current mortgage product and provider, December 2015
Interest in overpayment indicates growing confidence
Figure 7: Interest in features of a new mortgage product, December 2015
39% of renters don’t think they’ll ever be able to afford their own home
Figure 8: Attitudes towards property ownership and mortgages, December 2015
What we think
ISSUES AND INSIGHTS
Mortgage lending must adapt to meet an aging population
The facts
The implications
Customers could be exposed by changes in interest rates
The facts
The implications
Do mortgages and mobile technology really mix?
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Gross mortgage lending to build momentum in 2016
Housebuilding continues to fall short
Broker channel dominates following MMR
MARKET SIZE AND FORECAST
Gross mortgage lending accelerated through 2015
Figure 9: Gross mortgage lending, not seasonally adjusted, 2011-15
Figure 10: Quarterly gross mortgage lending, not seasonally adjusted, 2013-15
Gross mortgage lending expected to reach £336 billion in 2020
Figure 11: Forecast of gross mortgage lending, 2010-20
Figure 12: Forecast of gross mortgage lending, at current and constant prices, 2009-19
Forecast methodology
MARKET SEGMENTATION
Re-mortgages recover after suffering under MMR
Figure 13: Value of new mortgages by purpose of loan, not seasonally adjusted, 2011-15
Figure 14: Number of new mortgages by purpose of loan, not seasonally adjusted, 2011-15
MARKET DRIVERS
House price growth shows signs of cooling
Figure 15: Annual change in average UK house prices – Comparison of four sources, Q1 2008-Q3 2015
Low interest rates continue to support mortgage ownership
Figure 16: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for 2 year variable rate mortgage at 75% loan to value, 2 year fixed-rate mortgage at 75% loan to value and standard variable rate (SVR), January 2010-February 2016
Housebuilding has recovered but must grow further
Figure 17: Number of permanent dwellings started and completed, 2007-08/2014-15
MMR rules have reshaped the market in favour of advice
European Union Mortgage Credit Directive burden for second mortgage providers
CHANNELS TO MARKET
Broker channel takes precedence following the MMR…
Figure 18: Distribution of regulated mortgage sales, direct versus intermediated, 2009/10-2014/15
…and almost all mortgage sales are now advised
Figure 19: Distribution of regulated mortgage sales, advised versus non-advised, 2009/10-2014/15
KEY PLAYERS – WHAT YOU NEED TO KNOW
Smaller lenders make good progress but traditional names dominate
Building societies push to differentiate from banks
Lenders look to sweeten the deal beyond the interest rate
MARKET SHARE
Smaller lenders make good progress but traditional names dominate
Figure 20: Selected mortgage providers, market share by gross new mortgage lending, 2015
Figure 21: Selected mortgage providers, market share by gross new mortgage lending, 2013-15
BRAND RESEARCH
What you need to know
Brand map
Post Office and Nationwide lead on trust
Figure 22: Attitudes towards and usage of selected finance brands, November 2015
Key brand metrics
Nationwide also leads on offering an excellent experience
Figure 23: Key metrics for selected finance brands, November 2015
Brand attitudes: Traditional banks cluster around good quality and customer service
Figure 24: Attitudes, by brand, November 2015
Brand personality: Santander advertising promotes fun and vibrancy
Figure 25: Brand personality – Macro image, November 2015
HSBC, Barclays and Lloyds seen as impersonal
Figure 26: Brand personality – Micro image, November 2015
Brand analysis
Traditional banks succeed despite profiteering image
Nationwide and Halifax take strength from fair and progressive image
The Post Office is unbeatable for awareness and reputation
Co-op suffers from recent poor press
COMPETITIVE STRATEGIES
Help to Buy ISA presents opportunity for early engagement with savers
Halifax
Santander
The rest of the market
Lenders offer sweeteners to compete beyond rates
Nationwide
Halifax
Virgin Money
Barclays
ADVERTISING AND MARKETING ACTIVITY
TV advertising is extended to capture the growing first-time buyer market
Figure 27: Above-the line, online display and direct mail advertising expenditure on mortgages, 2013-15
Brand building dominates advertising spend
Figure 28: Above-the line, online display and direct mail advertising expenditure on mortgages, by product type, 2015
HM Treasury invests in promoting government schemes
Figure 29: Top 20 advertisers for above-the line, online display and direct mail advertising expenditure on mortgages, 2013-15
Nielsen Media Research coverage
THE CONSUMER – WHAT YOU NEED TO KNOW
A third of people hold a mortgage on their main home
Low interest rates encourage uptake of fixed rate mortgages
Online research is a crucial starting point for many
Delivering the flexibility customers want is a challenge for lenders
Interest in overpayment indicates growing confidence
39% of renters don’t think they’ll ever be able to afford their own home
MORTGAGE OWNERSHIP
A third of people hold a mortgage on their main home
Figure 30: Mortgage ownership, December 2015
Single people struggle to get on the housing ladder
Figure 31: Mortgage ownership, by marital status, December 2015
TYPE OF MORTGAGE HELD
Fear of interest rate rise encourages uptake of fixed rate mortgages
Figure 32: Type of mortgage held, December 2015
Over-45s more likely to hold SVR mortgages than younger age groups
Figure 33: Type of mortgage held, by age, December 2015
TIMING OF LAST MORTGAGE PURCHASE
Low interest rate deals have driven fixed-rate mortgage sales in the last year
Figure 34: When mortgage was arranged by type of mortgage held, December 2015
Figure 35: Level of concern about potential interest rate rise in 2016, December 2015
METHODS USED FOR MORTGAGE-RELATED ACTIVITIES
Online is the most popular research method for mortgage products
Figure 36: Methods used for/interested in for researching and arranging a mortgage product, December 2015
Mortgage holders more likely to go online for straight-forward administration
Figure 37: Methods used for/interested in for administrating a mortgage product, December 2015
Millennial mortgage holders are more interested in mobile management
Figure 38: Use/interest in using a smartphone for mortgage-related activities, by age, December 2015
SATISFACTION WITH CURRENT MORTGAGE PRODUCT AND PROVIDER
Few are confident that their mortgage is the best option for them
Figure 39: Satisfaction with current mortgage product and provider, December 2015
Millennials less likely to be satisfied with provider communications
Figure 40: Satisfaction with current mortgage product and provider, December 2015
Most are happy with only one aspect, showing satisfaction could be broader
Figure 41: Number of statements selected indicating satisfaction with current mortgage product and provider, December 2015
INTEREST IN FEATURES OF A NEW MORTGAGE PRODUCT
Interest in overpayment indicates growing confidence
Figure 42: Interest in features of a new mortgage product, December 2015
Half of highest earners interested in overpaying
Figure 43: Interest in the ability to overpay on a new mortgage product, by gross annual household income, December 2015
ATTITUDES TOWARDS PROPERTY OWNERSHIP AND MORTGAGES
39% of renters don’t think they’ll ever be able to afford their own home…
But 28% say that renting is more suited to their lifestyle
Figure 44: Attitudes towards property ownership and mortgages, December 2015
More than half of 45-54s give up on homeownership
Figure 45: Attitudes towards property ownership and mortgages, by age, December 2015
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Figure 46: Best and worst case forecast of gross mortgage lending, 2015-20
Forecast methodology