We have seen some significant changes in the mortgage market over the last year, the most substantial being the implementation of the Mortgage Market Review (MMR) in April. Undoubtedly one of the most extensive pieces of legislation the sector has witnessed in the last decade. We are still feeling the shockwaves now. So with the new regulation finally starting to bed-in, as we move into 2015 what will the market look like?
Confidence has certainly returned, both on the part of lenders and consumers, and as a result, the market has returned to growth. With no major regulations or directives due, 2015 promises relative stability compared to 2014, and there is every chance that this growth will continue. Although a rise in bank base rate has been on the agenda for a while now, latest predictions forecast that the Monetary Policy Committee (MPC) will maintain the current, historic lows for this year, supporting a stable outlook.
One positive change we could see is an increase in product innovation, with the focus shifting from the first time buyer to the last time buyer. Awareness of the need for more products geared towards lending into retirement has started to increase, and 2015 may well be the time that this innovation gains momentum. There have been numerous reports of borrowers in their 40s (or over) struggling to secure a mortgage deal as a result of lenders tightening their lending criteria following the MMR. At the 2014 annual CML conference, the FCA described this as an unintended consequence of the legislation, encouraging lenders to be ‘sensible’ and ease their position on ‘older’ borrowers.
Another product which could see growth next year is Equity Release. Recent stats from the Equity Release Council (ERC) revealed that in2014 lending surpassed the £1.4 billion mark, the highest since records began. This uplift in demand could bring more providers to the Equity Release market, with some of the main high street lenders also moving to offer these deals.
Post April 2015, we might also see a boom in the Buy to Let (BTL) sector. The changes announced in last year’s Budget mean that individuals no longer have to buy an annuity upon retirement, freeing up the cash in their pension pots. This could cause an injection of investment in the BTL space, as pensioners look to convert their pension’s savings into assets that also provide them with a regular income with the security afforded by property.
As we go into 2015, there is certainly lot of opportunity for lenders and advisers alike. In addition to product innovation, lenders will have to give serious thought to their systems and processes. Using technology as a means to stay competitive is growing in importance. Increasingly, high street giants are finding it hard to keep up with challenger banks and new entrants, as they are held back by inflexible legacy systems. For intermediaries, the increasing need for advice will be their main area of growth. So whilst 2015 may not see the introduction of any new rules or regulations, it is certainly shaping up to be an exciting year for all those willing to seize it.