It’s the start of a new year and the papers are full of reviews from 2006 and predictions for 2007. The challenge, having written this column, is to work out who is right in their analysis and predictions; will it be Chelsea or Man Utd for the title, or is my team, West Bromwich Albion, going to make a miraculous leap from the Championship to take glory? It’s as confusing as that.
Take an article in Financial Adviser (11/1/07): Halifax’s First Time Buyer report claimed a 7 per cent fall in the number of first-time buyers, making it the worst year for new borrowers since 1980, with the number of new borrowers down from 465,000 in 1996 to 315,000 last year. But in the same article Mortgages Direct showed an increase in the number of first-time buyers, claiming that this sector of the market accounted for nearly half of all new mortgages taken out in December, stating that income multiples and consumer confidence were behind the rise.
The same contradictions appear in the buy-to-let market. A Mortgage Trust survey of brokers, appearing in Mortgage Solutions (8/1), leads you to believe the market is set to continue its upwards trend with almost 1 in 5 expecting growth of over 25 per cent. No-one in the survey suggested the sector will contract. This is supported by predictions in Mortgage Strategy (8/1), that the entry of Bulgaria and Romania into the EU will drive between 56,000 and 180,000 immigrants into the UK, prompting further growth in the buy-to-let market. But further on, Kevin Paterson writing in Mortgage Strategy highlights news from Allsops, the UK’s largest auctioneer, that investment property repossessions now make up more than half of its properties for auction and claims that this is a useful barometer of market conditions. In Financial Adviser, David Miles, chief economist of Morgan Stanley, states that the buy-to-let market will be one of the first victims in a house price crash, stating the current buoyancy relied on speculative investors who would avoid the market if it slowed down.
Mark Harris, managing director of Savills Private Finance, believes that with mortgage lending predicted to hit the £345 billion mark in 2006, we are unlikely to hit the same heights. He predicts that lender retention schemes will have an impact on the remortgage market which could see up to a £50 billion fall in the market size. But in Mortgage Solutions, in its most recent survey on the financial services industry, the Confederation of British Industry and Pricewaterhouse Coopers predict another robust year. Backing this up in Mortgage Strategy is Alan Cleary, MD of edeus. He predicts a lower impact for retention schemes but does suggest a more aggressive approach by lenders who have these schemes in place.
Interestingly, Mortgage Solutions’ Market Analysis piece highlights the confusion: according to HBOS a strong economic background will underpin another healthy year for the housing market in 2007 but higher interest rates, greater pressure on household finances and subdued real earnings growth will constrain housing demand. But this has not diminished new lenders’ appetites to enter the UK market. Rob Griffiths, associate director of AMI, confirms that he has heard of between 20 and 30 new entrants considering entering the housing market. The article states the impact of new entrants during the year means lenders will have to adapt to changing market conditions.
The new mortgage landscape has been brought to life by a survey from Alliance & Leicester in conjunction with the Centre of Future Studies. This research predicts that the growth in the housing market will be dominated by the number of ‘living loners’, the number rising 53 per cent to 9.9 million over the next 20 years, the equivalent of three quarters of the total annual household growth over this period. The times where properties are owned by a couple with 2.4 children would appear to be a thing of the past when you take into account higher divorce rates, separated couples, people staying single longer and settling down later in life.
Tying into our changing lifestyles, the top of the agenda for the Government at the moment seems to be the environment. The launch of Home Information Packs this year (a statement many still think is a strange prediction) has at its centre the Energy Performance Certificate (EPC). In an article in this week’s Mortgage Strategy, Housing Minister Yvette Cooper has hinted at Government support for green mortgages, linking the EPC so that home owners could get loans at preferential rates, but didn’t go further into the detail. Only a handful of lenders currently provide eco-friendly mortgages, but this is set to grow once the Government reveals its plans.
So having read the papers this week, it’s clear that experts are divided on what 2007 will bring in the mortgage industry. The only dead certainty I can put my money on, which has not been widely reported, is that Albion will have to wait till next year to lift the premiership trophy.
