IMLA Publications

Borrowers should explore all their options after the mortgage industry’s radical steps to innovate in response to the pandemic

• The easing of social distancing restrictions has allowed a re-opening of the economy and a period of strong economic growth. This will fade somewhat in the second half as Covid support measures are withdrawn and the country tackles raw material and labour shortages.
• While it is difficult to gauge the true extent of inflationary pressures, the odds are shortening on the Bank of England nudging interest rates higher next year.
• The housing market has experience huge spikes in activity associated with the stamp duty holiday. While the second half of the year will be quieter without stamp duty concessions, housing demand and house prices will continue to be supported by lifestyle preferences and attractive mortgage pricing.
• The availability and pricing of high LTV loans has improved materially over recent months. These trends look set to continue over the short-term and will provide much-needed support for first-time buyers who are having to cope with higher house prices and elevated deposit requirements.

• We agree with and support many of the statements made in the Discussion Paper.
• Firms which embrace diversity at all levels, but particularly at Board and senior management level, have been proven to be more effective and – by implication – more profitable/sustainable. So quite apart from the fact that increasing diversity and inclusion is simply the right thing to do in terms of treating people with respect and as individuals, there is a big incentive for firms to expand their horizons and ways of thinking and operating.
• For financial services firms, this should go beyond internal structures and management: they need to ensure they are engaging effectively with their current and future customer bases to make sure that they are responsive to those customers’ expectations and demands.
• The challenge will be in how to measure success: what does success look like? Any new rules need to be effective and enforceable.
• It may be necessary to do a lot more preparatory work to ensure individual firms have effective internal communication and have built up the trust of their staff before embarking on data-collection exercises which, if not properly positioned and introduced, could end up being ineffective and even misleading.

• It is not clear to IMLA what benefits a new Consumer Duty would bring
• Since its creation the FCA’s predecessor, the FSA published numerous documents emphasising its expectations of firms and of the leadership provided by Boards and senior management
• There are numerous examples of statements made by the former FSA and the FCA setting out the regulator’s expectations of firms’ behaviour towards their customers
• If the regulator has been unable to enforce its own rules it is unclear that the creation of a new package of measures will succeed in the instances where the existing framework has failed

• The economy has staged a strong recovery from the COVID-19 lockdown induced slump
• The UK housing market has defied economic forecasts and staged a sharp recovery in terms of prices and transaction levels
• The strong housing market has stimulated a surge in mortgage lending
• Longer term implications of COVID crisis are becoming clearer
• IMLA forecasts that house prices will be broadly flat in the second half of 2021 but will rise 1.6% in 2022
• IMLA is raising its forecast for mortgage lending from £283 billion to £285 billion in 2021

• The UK economy is currently enjoying a post-lockdown bounce in economic activity, amid growing confidence that the successful roll-out of our Covid vaccination programme will allow further easing despite the ongoing challenge of new variant strains.
• Housing market sales and house prices have recently been running at their strongest since the global financial crisis and look set to continue strongly for much of the year.
• It is a similar story for mortgage lending, with gross and net industry mortgage lending this year set to deliver their strongest performance since 2007.
• First-time buyer numbers have lagged somewhat, as higher house prices have exacerbated affordability pressures by lifting the size of loans needed and deposit requirements. This may be mitigated by better availability and keener pricing of high LTV loans.
• The Bank of England is currently happy to look through short-term inflationary pressures and to maintain an accommodative monetary stance.

• While the UK economy is currently stuck in reverse gear because of the third national lockdown, there is a growing confidence that the successful roll-out of our Covid vaccination programme and further fiscal stimulus measures herald a sustained economic recovery.
• A shift in housing demand, triggered by the social distancing measures made necessary by Covid-19, rather than the temporary stamp duty holiday, appears to underpin the recent strength of housing market sales and house prices.
• While the end of the stamp duty holiday may mean that activity levels are more subdued for a period, widespread market disruption or house price falls now seem very unlikely.
• The new mortgage guarantee scheme will encourage mortgage firms to return to 95% LTV lending sooner, but it does not represent a panacea for first-time buyers nor will it transform the affordability challenge facing them.

The eighth in our series of annual reports looking at the outlook for the UK mortgage market in the coming year.

• With GDP still considerably below its pre-Covid level, there should be further
  economic recovery next year. But there is huge uncertainty about its precise
  path and nature, and this means that prospects for jobs, household sentiment
  and the housing market are also uncertain.

• The housing market has been experiencing strong growth and record house
  prices in recent months because of the release of pent-up demand, changes in
  housing aspirations and the temporary stamp duty holiday. These factors are set
  to unwind in the first quarter of next year.

• House prices may ease back through 2021 and 2022, reversing some of the
  recent sharp gains.

• Government policies have created an inadvertent “cliff edge” for the housing
  market at the end of March, with the stamp duty holiday ending and a move to
  less generous Help to Buy arrangements at the same time as job support
  schemes are withdrawn.

• While most mortgage borrowers who opted to defer their mortgage have
  already resumed payments, some households will be struggling with their
  finances and their ranks are likely to grow when Government support measures
  wind down. This will show through in higher arrears and possessions figures
  through 2021 and beyond.

• Post-lockdown, there has been a strong recovery in housing market activity
  across most of the UK. July’s temporary cut in stamp duty appears to have
  accelerated demand. House prices on several measures have reached record
  levels.

• This sits oddly with the economic damage that social distancing measures have
  wreaked on businesses and households, the scale of which will become more
  apparent when the Government unwinds key support schemes at the end of
  October.

• Mortgage lenders have successfully grappled with significant operational
  challenges over recent months, not least administering wide-scale payment
  holidays and a shift to remote-working.

• A surge in borrower demand over the past couple of months has created
  additional challenges. Firms have been competing less aggressively in parts of
  the market such as higher LTVs, as a way of managing new lending pipelines,
  maintaining customer service standards and controlling risk in the face of
  economic uncertainties.

• Significant numbers of mortgage borrowers who opted to defer their mortgage
  payments have already resumed their normal monthly payments, and this bodes
  well for the numbers in genuine financial distress that are likely to need ongoing
  forbearance.

• The strong pick-up in activity that has followed the re-opening of England’s
  housing market has surprised on the upside, but seems likely to dissipate over
  the coming months as households become more cautious in the face of business
  failures and higher unemployment.

• The housing and mortgage markets are unlikely to be shielded from the
  economic damage resulting from the Covid-19 pandemic, although fresh
  concerted action by the Government should help to limit the adverse impacts.

• Lenders’ credit risk appetites will shrink back as we go through a period of house
  price weakness and jobs uncertainty. Higher deposit requirements may mean
  that would-be first-time buyers see little benefit from any house price falls.

• The financial sector is resilient and well-placed to handle an expected increase in
  mortgage arrears and possessions from historically low levels and to support new
  lending when market conditions improve.

• First time buyer numbers fell back slightly in 2019 to 352,000, but were still 84% above the low of 191,000 recorded in 2008.

• Main drivers of higher first time buyer numbers have been improved affordability as mortgage rates have fallen and lenders’ increased appetite to support this group.

• Longer term context suggests that first time buyer numbers are still disappointing.

• Short-term outlook is highly uncertain due to the coronavirus but longer-term outlook is positive as strong affordability coupled with a large pool of potential first time buyers points to continued growth.

• Lenders need to ensure that the proposed end of Help to Buy equity loans in March 2023 does not create a new constraint on first time buyers of new homes.

• IMLA calls for government to assess the impact of post-financial crisis regulatory changes and consider easing these restrictions to help new home buyers lead the post-Covid recovery.

• We are in every sense in uncharted territory, given the rapid pace of
  developments associated with the Covid-19 pandemic and the backwardlooking
  nature of market and wider economic indicators.

• The coronavirus outbreak represents an additional headache for the UK
  Government, given that it threatens to derail our economy at a time when
  global slowdown and the need to adjust to life outside the EU makes the UK
  especially vulnerable.

• The UK authorities have responded with a determined and coordinated effort
  to pre-empt the challenges that preventative measures will give rise to and to
  limit the economic fall-out.

• Mortgage lenders, and financial firms more widely, have been quick to play
  their part, offering timely help to households and businesses.

• The next several months will undoubtedly be challenging for the housing and
  mortgage markets (and more widely), but, with a solid framework for
  damage limitation in place, we can at least be relatively optimistic about the
  medium-term.

This article was originally published on 7th February in Mortgage Solutions

This article was originally published on 28th January in Mortgage Strategy

The seventh in our series of annual reports looking at the outlook for the UK mortgage market in the coming year.

This article was originally published on 16th December in Mortgage Solutions

• Concerns about the domestic political situation, economic slowdown and job security have been adversely affecting household sentiment. December’s clear General Election result offers a short-term psychological boost. It is not clear to what extent this will specifically benefit the housing market.

• Negotiations regarding our future trade relationship with the EU are important for the UK’s longer-term prospects and, at this stage, a source of uncertainty.

• The housing market is more or less in a steady state currently, as far as house prices and activity levels are concerned.

• The phasing out of the Help to Buy Equity Loan Scheme from 2021 will loom ever more strongly next year, and it is to be hoped that the forthcoming Budget addresses this issue.

• Younger generations are struggling to attain the financial security that most of their parents enjoyed
• There has been a marked reduction in homeownership rates among younger households compared to the rates seen in earlier generations
• High house prices is not the main cause of the fall in first time buyer numbers
• The long term cost to consumers of not purchasing a home is extraordinary
• As well as the generational divide we need to remain mindful of the housing divide
• IMLA calls for a cost benefit analysis of the current regulatory regime for mortgages which takes account of the cost to consumers who have failed to enter owner-occupation because of the additional hurdles they face accessing mortgage finance because of tightened regulation.

• Brexit represents a momentous economic change for the UK and huge uncertainties are associated with it.
• Mortgage lenders hope that our departure from the EU can be an orderly one.
• But the odds of a disorderly no deal Brexit, with adverse short-term consequences for the wider UK economy, have shortened over recent months.
• Policy-makers have extensive tools to mitigate any adverse effects in the housing market and are likely to deploy them.

This article was written for the October 2019 issue of Housing Market Intelligence

Key developments in the housing and mortgage markets

• The housing market has been relatively resilient in the face of Brexit
  uncertainties to date, with most measures indicating slightly higher activity as we
  headed into the summer.

• House purchase activity has been underpinned by the strong jobs market,
  competitive mortgage deals and slowing house price growth.

• Levels of remortgaging remain high but have begun to ease back following a
  lengthy upturn.

• Concerns about the domestic political situation, slowing economy and job
  security are adversely affecting household sentiment. The forthcoming Autumn
  Budget provides an opportunity for the Government to counter the gathering
  economic headwinds.

• The ongoing recovery of real earnings has helped to offset some of the negative
  sentiment arising from Brexit uncertainties.
• Housing market activity and property prices are flat, broadly speaking, across
  much of the country. First-time buyer numbers continue to rise modestly,
  underpinned for the time being by a strong jobs market and competitive
  mortgage deals.
• Levels of remortgaging are high, but there are early signs of waning borrower
  demand and limits to how much more intense competition between mortgage
  lenders can be.
• The market may enjoy a temporary “Brexit bounce” when the UK agrees a
  transition deal with the EU, but market fundamentals may dictate a quieter
  period down the track.

This article was originally published on 14th May in Mortgage Introducer

This article was originally published on 14th May in Mortgage Introducer

This article was originally published on 5th May 2019 in Mortgage Solutions

• The housing market has not been immune from the wider Brexit uncertainties adversely affecting the UK
• This, together with growing job insecurity, has sapped household confidence and weighed down on housing market activity and property prices
• Mortgage credit terms and availability remain mostly favourable, however, and, once there is a degree of clarity about the UK’s future relationship with the European Union, we could see a bounce-back as pent-up demand is released.

This article was originally published on 7th February 2019 in Mortgage Introducer.

The sixth in our series of annual reports looking at the outlook for the UK mortgage market in the coming year.

Response by the Intermediary Mortgage Lenders Association

This article was first published on 19th January in Mortgage Solutions

IMLA responds to proposals to increase the FOS award limit.

Digitisation and advances in computing power are reshaping numerous industries. In travel, entertainment and retail the structure of the industry and the key providers have been fundamentally altered by the digital revolution. Retail financial services has also seen transformation in products such as current accounts and insurance. In mortgages change has been slower to come but both back office processes and distribution are in the process of being dramatically reshaped.

This article was first published on 5th December in Mortgage Finance Gazette.

IMLA comments on proposals set out in DP 18/5, and provides responses to specific questions.

This article was first published on 23rd October 2018 in Mortgage Finance Gazette.

As homeowners age at a faster rate than the UK population, developments in post-retirement lending are putting a strain on the current model of financial advice, with the need to serve a growing population of older homeowners producing a new generation of mortgage products. In its latest report, IMLA calls on UK financial advisers to break down the silos between pension and mortgage advice, and offer a more holistic service to keep up with the pace of product innovation.

Bob Pannell looks at the impact of a potential Bank base rate rise this year on mortgage borrowers. Published in Mortgage Finance Gazette: https://www.mortgagefinancegazette.com/uncategorised/mortgage-borrowers-higher-mortgage-rates-06-06-2018/

This article was first published on 21st May 2018 in Mortgage Strategy

A guide to the requirements of the GDPR, which comes into force on 25th May 2018: this guide is designed to be helpful to lenders and intermediaries, and to complement the guidance issued to its members by the AMI.

Bob Pannell discusses how net lending levels serve useful barometer for the underlying health of our mortgage market, as published in Financial Reporter:
http://www.financialreporter.co.uk/features/approaching-the-limits-to-lending-growth.html

The fifth in our series of annual reports looking at the outlook for the UK mortgage market in the coming year.

The latest figures confirm that there were about 366,000 first-time buyers in the UK in 2017. This is a positive outcome, in a year when overall property transactions eased back a little. First-time buyers now account for 30% of overall housing market activity.

This article was first published on 26th February 2018 in Mortgage Solutions

Looks at the impact which a plethora of tax and regulatory changes have had on the buy-to-let mortgage market and the wider implications for the private rented sector.

Examines lenders’ increasing confidence in lending on new-build property, together with the impact of the Help to Buy equity loan scheme.

Charts the rise, fall and resurgence of specialist lenders and the emergence of “challenger” banks.

The fourth in our series of annual reports looking at the outlook for the UK mortgage market in the coming year.

Summarises the views of leading figures from four mortgage intermediary firms and four mortgage lenders about how they see the current state of the intermediary/lender relationship and how this might evolve in the future.

Analyses whether the market is delivering appropriate access to credit, together with sufficient competition and transparency for consumers.

An industry guide to lender and intermediary accountabilities and responsibilities in mortgage sales and servicing: updated to take account of the Mortgage Credit Directive

Argues for a more joined-up approach to UK housing policy.

The third in our series of annual reports looking at the outlook for the UK mortgage market in the coming year.

Charts the changing pattern of intermediated and direct mortgage business pre-and post- the financial crisis.

Examines the key issues facing the main segments making up today’s mortgage market: buy-to-let, first-time buyers, home movers, re-mortgagers, lifetime mortgages and further advances.

Analyses the cost of the regulatory changes brought in following the financial crisis and the impact these have had on the efficiency of the financial system and on the wider economy.

The second in our series of annual reports looking at the outlook for the UK mortgage market in the coming year.

December 2014–January 2105 research

Summarises the key agendas for the political parties and politicians to address during the election campaign.

Joint response by the Council of Mortgage Lenders and the Intermediary Mortgage Lenders Association to the Financial Conduct Authority Consultation Paper CP 14/28

A response by the Intermediary Mortgage Lenders Association

Looks at the impact of the financial crisis on non-standard borrowers: the self-employed, those with adverse credit, those borrowing into retirement and those with complex financial affairs.

Q3 2014 research

Examines the housing and mortgage markets and the likelihood of the Bank of England using its new macro-prudential powers to curb the latter.

An industry guide to lender and intermediary accountabilities and responsibilities in mortgage sales and servicing: updated to take account of the Mortgage Market Review

Analyses the growth in the proportion of private rented sector properties being acquired without a mortgage.

The first in a series of annual reports looking at the outlook for the UK mortgage market in the coming year.

January 2014 research

July 2013 research

Contributes to the discussion between government and the industry about the future operating basis and assumptions for the UK housing market, and whether current government support for the housing and mortgage markets will move both forward on a stable and sustainable basis.

July 2012

Q4 2011

An industry guide to lender and intermediary accountabilities and responsibilities in mortgage sales and servicing