If your mood has been influenced by the recent forecasts produced by the Council of Mortgage Lenders (CML), Financial Services Authority (FSA), Bank of England and others, then you have every reason to feel near-suicidal.
‘Bleak’ is an understatement as there appears to be no basis for optimism if you happen to make your living in the UK mortgage market.
Without trawling over all the well-publicised facts and figures once again, the general message is that the market is slowing, arrears and possessions are rising, house price growth may well be negative in 2008, non-conforming borrowers are going to find it virtually impossible to get a loan of any sort, the economy is teetering on the brink of recession, and so it goes on.
A breath of fresh air
It therefore came as a breath of fresh air to hear Peter Williams, executive director of the Intermediary Mortgage Lenders Association, put the issues back in perspective.
He said: “We are surprised the FSA is adopting such a downbeat approach, and that it is omitting to highlight the many positives in the market. We would like to see the FSA, the Bank and the Treasury taking a more positive lead to help restore confidence among investors, lenders and consumers.”
Here, here. He points out, for example, that although arrears and possessions are forecast to rise, the CML’s forecast figures still remain exceptionally low when taken in the context of the total number of UK borrowers.
We are not trying to paper over the fact that an increasing number of borrowers will experience payment difficulties in 2008, but we are trying to put in focus the fact that those who do experience financial hardship constitute a small minority.
On a separate issue, he also highlights that the FSA’s warning about the risks to investors in whole loan sales, could potentially close off an important source of liquidity available to lenders.
It does seem a strange time for the FSA to warn financial institutions to think twice before buying further portfolios in the future when they have been buying and selling loan portfolios successfully for many years. If they have sufficient funding and have carried out the appropriate due diligence, why not buy another book?
Talking us into trouble
There is a real danger that we could end up talking ourselves into trouble. I was having one of those classic pub conversations with a friend the other day who had been considering moving home next year.
She told me that she has now put the idea on the back burner because the recent bad news about the market has dented her confidence.
However, her personal circumstances have not changed, her job is safe and secure and her finances are in good shape. The truth is that she has no reason to change her plans – other than having a bad dose of the jitters.
I’m sure my friend’s attitude and anxieties reflect those of many thousands of home owners who have no real reason to be worried about the future, other than the stream of scare stories they see on television and in the newspapers.
A sense of perspective
Before I give you my take on developments, let me emphasise that I’m not simply trying to talk up the market, there just needs to be a sense of perspective.
Yes, the market is going to slow in 2008. My guess is that gross lending will end up being just over £300 billion, which is lower than the CML’s forecast, but it is still significantly more than 2005.
I suspect house prices will remain flat and, on average across the UK, they will show no growth or even modest reductions. However, as always, there will be housing hot spots and cold spots and the watchword will be ‘location’.
The remortgage market is the big opportunity for brokers in 2008. 1.4 million borrowers will be looking for better deals and never has professional advice been more important.
Despite some saying the buy-to-let market is dead, it is anything but. The credit crunch may have deterred speculative investors, but they made up less than 10 per cent of the total market anyway. The majority of serious investors and landlords remain committed and see their portfolios as long-term investments. My view, therefore, is that the buy-to-let market will continue to present good opportunities for brokers in 2008.
There’s no denying that the future of the non-conforming sector looks uncertain and self-cert remains under scrutiny from the FSA, but products such as offset mortgages are rising in popularity. Opportunities will exist in the year ahead for those brokers who are willing to hunt them down.
Don’t let the depressing headlines get you down. Remember, every cloud has a sliver lining.
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