Zurich Financial Services
Some businesses thinking of applying for Principal status will realise that it will not be economically viable for them to do so and either cease trading, amalgamate with another businesses or alter their focus. At the beginning of the year businesses should be thinking ahead to make sure any potential host is match fit.
We also expect thousands of mortgage brokers to make the wrong decision.
Appointed representative or directly authorised? If AR, which host? Many brokers will make the wrong decision as they may pick a network that does not correctly fit around the business needs of their company. However, nothing is for life, so if you make the wrong decision you can always change in the future.
We also expect equity release to become a more recognised method of funding retirement. Although not without risks, this market area has a valid place for the right clients.
The Council of Mortgage Lenders (CML)
The CML predicts that house prices will rise 8 per cent this year, and 6 per cent in 2005. First-time buyers will continue to be scarce, accounting for around 29 per cent of the market.
It also expects gross lending to rise by 6 per cent this year to £285 billion, and £286.5 billion in 2005. Net lending is also forecast to rise by 6 per cent this year, reaching £102 billion. Upward movement in interest rates and increasing employment pressures, while modest, are expected to nudge arrears and possessions above their current very low levels. However, the CML expects them to continue to remain below 2001 levels, and way below the levels experienced in the 1990s, for both 2004 and 2005.
Commenting on the forecasts, CML director-general Michael Coogan, said: “We await with great interest the recommendations from the Miles and Barker reviews of fixed-rate mortgages and housing supply. Lenders meanwhile will also be gearing up for the onset of statutory mortgage regulation in October. By the end of the year consumers will be beginning to experience the benefits.”
Homebuyer Events
Nick Clark, managing director of Homebuyer Events, said: “Property experts are predicting that the effects of a further ten countries joining the EU in 2004 will have a huge impact on the UK housing market. With the UK already among the most popular choices for asylum seekers, the prospects of significant inflows of workers, both manual and professional is significant. We are talking about potentially hundreds of thousands of people, which is likely to create a marked increased in demand for rentals.
“With limits to supply, this can only bid up rents, and send the buy-to-let sector into another boom phase.”
Bradford & Bingley Lettings
Judienne Wood, national director for Bradford & Bingley lettings, said: “Bradford & Bingley predicts a similar market to this year. However, it believes we may experience an increase in the number of corporate lets as the American economy picks up and the UK and European markets settle and begin to grow. Relocation agent activity has increased over the latter part of the year with many of our agents reporting marked growth in corporate tenants.
“Young professionals will continue to be the mainstay of the rental market, the prospect of interest rate rises and increasing house prices have persuaded many would-be buyers to rent for longer.”
Paragon Mortgages
John Heron, managing director of Paragon Mortgages, said: “Reflecting landlords’ natural caution as businessmen, they are basing their commercial assumptions on a lower level of growth in 2004. However, landlord rental yields, which have averaged around 7.60 per cent over the past six months, are expected by landlords to remain stable over the next twelve months.
“With interest rates widely expected to rise further in 2004, what are the potential risks? The risk profile is lower on buy-to-let, with arrears at less than half the level of mainstream mortgage lending – 0.45 per cent of buy-to-let loans are three months or more in arrears compared with 0.98 per cent of mortgages overall.”
National Association of Estate Agents (NAEA)
Peter Bolton King, spokesman for the NAEA, said: “The bi-annual Economic Report produced by the NAEA forecasts that the global economy will continue its recovery, leading to stronger economic growth in the UK. The resulting combination of rising interest rates, council tax hikes, and reduced investor demand, will lead to a weaker housing market in 2004.
“We predict that interest rates will rise to 4.75 per cent with the potential for mortgage rates to hit 6 per cent for the first time since 2000. This could stretch some households re-emerging from cheaper fixed-rate and discounted deals arranged last winter. However, no market crash is predicted because of the sustained low interest rates (a 6 per cent mortgage rate is still very low by historical standards), and continued strong growth in earnings and employment.”
2002
2003
2004
House Prices
20 per cent
11 per cent
4 per cent
Transactions
10 per cent
-7 per cent
-5 per cent
Mortgage rates
5 per cent
4.75 per cent
5.75 per cent
Real GDP
1.7 per cent
2.1 per cent
3 per cent
Average earnings
3.9 per cent
3.5 per cent
4.1 per cent
