2014 Predictions – Part 3: Mortgage Lending

2013 Prediction: £158 Billion
2013: Actual £170 Billion (CML estimate)
2014: £198 Billion

All the focus at the start of last year was on the Governments’ Funding for Lending Scheme, which led the Council of Mortgage Lenders, (CML) to expect £156 billion gross lending.

We plumped for £158 billion stating “we like to be optimistic”, but the reality is that things took off even more than we anticipated and looks set to finish somewhere around the £170 billion figure.

In fact, if current run rates are kept up then 2014 could see the £200 billion level exceeded, which would be a truly remarkable turn-around.

Once again lenders have certainly been talking a good game, with even more plans to bring more products to the market, enter into new areas and increase competition, especially at higher Loan to Values led by the Help To Buy 2 Scheme.

We are also beginning to see high-street lenders operate in “non-core” areas once more, with large loans up to £2m – £3m being wrestled back from the Private Banks and Buy-To-Let products increasing again as more lenders want to play in what they see as a profitable market.

Another key area set for substantial growth is the remortgage market.

Gone are the days of those coming to an end of their current product and moving on to a lower Bank Base rate linked reversion rate and those affected now are facing higher, standard variable rates which are subject to change at the whim of the lender.

With 2014 promising to be the last year that longer term fixes are as cheap for potentially a generation, those that can remortgage will undoubtedly take advantage, constrained only by changes in underwriting criteria and the disappearance of interest only borrowing.

It will be interesting to see what effect, if any, the Mortgage Market Review actually has on the lending market, particularly in the months of April, May and June as lenders get to grips with new systems and affordability responsibilities.

Potentially a slowdown will occur during this period although it is more likely to come in the direct space as some lenders realise that running a fully regulated sales team and following an advice process is tougher than they imagined.

Intermediaries however, who have acted in this manner for many years will take up the slack which is good news for consumers who will finally get the quality of advice they require across the board.

As things settle down, expect criteria to soften slightly, though nowhere near to the “passport and a smile” book of underwriting, which should be enough to help many new buyers back to the market.

This should help “second-steppers” who have hung on perhaps longer than they wanted to before looking to make that move upwards. Hopefully this will help to free up some much needed property, although Let-To-Buy is still popular.

For the first time since the credit crises the battlegrounds for lenders will be set across all areas, with high LTV lending potentially leading the way with room for rates to ease. Buy-To-Let, remortgaging, low LTV mortgages and a return of the specialist and commercial sectors will all however play their part.

Whilst we may just come up short of the £200 billion lending level, 2014 is set to be a busy year for everyone in the property game.

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