Table of Contents
Introduction and Abbreviations
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- Has the boom period for lenders come to an end?
- Report contents
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- Prepare for FTBs as their confidence in the market is restored
- The single-person market is growing and this needs to be recognised
- Relatively wealthy individuals favour Internet applications
- Banks and building societies should increase their mortgage-related Internet presence
Executive Summary
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- The top five players account for 60% of outstanding mortgage business
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- Figure 1: Mortgage market, by residential balance outstanding, key players, July 2005
- FTBs need a boost
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- Figure 2: Total mortgage debt outstanding, 2001-05
- Banks accounted for 60% of balances outstanding in 2005
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- Figure 3: Mortgage balances outstanding, by type of provider, 2005
- Gross advances reached £288 billion in 2005
- House prices continued to rise in 2005
- Wages inflation has fallen behind housing inflation
- Level base rates have steadied the market
- Changing British demography steers mortgage marketing activities
- HIPs and HomeBuy
- Mortgage distribution has been influenced by technology
- Direct sales accounted for around 45% of distribution share
- Largest proportion of marketing expenditure allocated to TV advertising
- Insight shows consumer motivation to remortgage
- Certain mortgagors would consider most products on the market
- Predictions of a sharp fall in house prices have receded
- The market grows more competitive
Market Factors
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- Market foreword
- The number of freehold transactions might rebound in 2006
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- Figure 4: Property transactions (England and Wales), 1970-2006
- The average house price has risen steadily since the mid-1990s
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- Figure 5: Average house prices, 1970-2005
- Competition has bolstered house prices in the regions
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- Figure 6: Regional average house prices (non-mix adjusted third quarter), England and Wales, 2002-05
- Growth in the BTL sector has partly sustained the wider market
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- Figure 7: Number of BTL mortgages outstanding, 2001-05
- Affordability constraints give rise to high income multiples
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- Figure 8: House price to earnings ratio, 1970-2005
- Standard variable rate mortgage holders are benefiting from low rates
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- Figure 9: Bank of England interest rate, January 1992-January 2006
- Mortgage debt remains high
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- Figure 10: Mortgage debt to household disposable income (homeowners), 1975-2005
- Repossessions and arrears
- Penetration of mortgages among owner-occupiers
- Interest in the stock market is reignited
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- Figure 11: FTSE 100 share indices, daily prices, January 1996-December 2005
- The changing composition of households will influence demand
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- Figure 12: Composition of households, 2002
- Consumers will have an increasing level of funds available for mortgages
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- Figure 13: Real (based on constant 1998 prices) PDI and consumer expenditure, 2004-09
- Regulatory issues
- Mortgage Green Paper (COM/2005/327)
- Integrating the European mortgage market
- Developments via Basel II
- The impact of Home Information Packs
- HomeBuy could noticeably expand the market
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- Figure 14: HomeBuy initiatives, February 2006
Market Size and Trends
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- Providers are dealing with a limited number of prospective borrowers
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- Figure 15: Total number of mortgages outstanding (at year end), 1995-2005
- Movers generated the most mortgage activity but changes are afoot
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- Figure 16: Number of loans for house purchase, by type of mortgagor, 1997-2005
- The value of mortgage debt rose by 77% between 2000 and 2005
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- Figure 17: Total mortgage debt and annual growth rates, 1986-2005
- Average mortgage debt has grown steadily
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- Figure 18: Average mortgage debt per mortgagor, 1995-2005
- Gross and net lending has slowed
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- Figure 19: Gross and net lending secured on dwellings, 1995-2005
- Demand for remortgages settles
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- Figure 20: Gross advances, by type of lending, 1993-2005
- Remortgaging business hesitates
- Second-home mortgages
- Further advances show growth
- Trackers accounted for 12% of business in 2005
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- Figure 21: Loans for house purchase, by product type, 2001-05
- Building society conversions have shaped the current market
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- Figure 22: Mortgages, balances outstanding, by type of institution, 1994-2005
- SIPPs – will enthusiasm for BTL continue?
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- Figure 23: BTL, mortgages outstanding, 1999-2005
- In 2005 the value of MEW stood just above the level seen in 2002
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- Figure 24: Value of MEW, 2000-05
- Lifetime mortgages will be regulated by the FSA
Key Players
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- HBOS ranked highest in 2004 with £189 billion in total mortgage balances outstanding
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- Figure 25: Largest mortgage lenders, by residential balances outstanding, 2004
- Company profiles
- HBOS
- Abbey
- Nationwide BS
- Lloyds TSB
- Barclays
Product Development
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- Societal changes will influence mortgage design
- Migration of non-prime individuals to the prime group
- Regulation may improve the mortgage proposition
- New products should reflect individual aspirations
- Fees assist in recouping losses from cheap rates
- MCOB rules shape mortgage product design
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- Figure 26: Mortgage conduct of business (MCOB) regulations, February 2006
- Direct Line launches its ‘packaged mortgage’
- Additional issues linked with mortgage product development
Distribution Trends
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- Distribution strategies are now more technology focused
- Branded divisions engage valuable individuals
- Banks and building societies appear favoured
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- Figure 27: Intention to use certain distributor type, January 2006
- The Internet grows in importance
- Direct distribution is the main channel
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- Figure 28: Mortgage distribution channels, by distribution share, 2005
- Growing market complexity has encouraged acquisitions
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- Figure 29: Mortgage distribution flow chart, February 2006
- Distribution styles
- Accountants and solicitors
- Direct sales and tied agents
- IFAs
- Mortgage brokers
- Nationwide BS trials Internet distribution service
Advertising and Promotional Activity
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- Trustworthy image inspires consumer confidence in the market
- Mortgage providers use a marketing mix to connect with consumers
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- Figure 30: Mortgage advertising expenditure, by outlet, December 2004-November 2005
- Intermediaries are highly valued by certain lenders
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- Figure 31: Mortgage advertising expenditure, by key categories, December 2004-November 2005
- Below-the-line activities offer a different message
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- Figure 32: Indicative mortgage-related advertising expenditure, by mortgagee, December 2004-November 2005
Consumer Financial Activity
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- Relationship with the main financial services providers
- Overall activity levels should be high
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- Figure 33: Savings, investment, borrowing and debt repayment – consumers’ expected activity, September 2004-December 2005
- Middle earners are becoming more active
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- Figure 34: Expected financial activity, by socio-demographic and income group, December 2005 and average for the last 16 quarters
- Pension management and saving will be the main activities
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- Figure 35: Leading financial activities planned in the next six months, December 2004-December 2005
- Subdued time for the property market
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- Figure 36: Intended mortgage and property purchase activity, December 2003-December 2005
- HSBC gains in terms of MFSP share
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- Figure 37: Leading main financial services providers: market shares, December 2004-December 2005
- HSBC will build up the level of its deposits in 2006
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- Figure 38: Saving, investment and lending market sizes, by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), December 2005
- HSBC will have the most active customer base
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- Figure 39: Activity levels of main financial providers’ customer bases, December 2005
- Halifax, HSBC and Nationwide BS have the highest proportion of savers
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- Figure 40: Activity intentions and current household financial situation, by MFSP, December 2005
The Consumer
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- Simple mortgage design is most favoured by consumers
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- Figure 41: Mortgage ownership, January 2006
- ABs favour straight repayment
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- Figure 42: Mortgage ownership, by gender, age, socio-economic group and marital status, January 2006
- Implications
- Individuals in the pre-/no family lifestage are key targets
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- Figure 43: Mortgage ownership, by lifestage, working status, gross annual household income and TV region, January 2006
- Implications
- Approaching FTBs 'go to Iceland'
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- Figure 44: Mortgage ownership, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, January 2006
- Implications
- Low interest rates appeal to 45% of mortgagors
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- Figure 45: Attitudes towards switching mortgage provider, January 2006
- Younger people watch the mortgage market
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- Figure 46: Sentiment toward switching mortgage, by gender, age, socio-economic group and lifestage, January 2006
- Implications
- Tap into accumulated wealth
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- Figure 47: Attitudes towards switching mortgage, by working status, age/socio-economic group, gross annual household income and tenure, January 2006
- Implications
- Certain individuals are sensitive to brand image
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- Figure 48: Attitudes towards switching mortgage, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, January 2006
- Implications
- Market watchers favour non-traditional products
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- Figure 49: Sentiment toward changing mortgage, by mortgage ownership, January 2006
- Savers would choose flexibility on repayments
Consumer Attitudes and Targeting Opportunities
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- More than a third of consumers agreed that owning a property would make them feel secure
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- Figure 50: Agreement with attitudinal statements regarding property, January 2006
- Individuals with relatively wealthy families were interested in additional investment
- Enthusiasm for property investment increases with age
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- Figure 51: Agreement with attitudinal statements regarding property, by gender, age, socio-economic group and marital status, January 2006
- Implications and opportunities
- Certain wealthier individuals feel that property investment is a big commitment
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- Figure 52: Agreement with attitudinal statements regarding property, by lifestage, age/socio-economic group, working status and gross annual household income, January 2006
- Implications and opportunities
- ABC1 families appear more focused on repaying their mortgage
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- Figure 53: Agreement with attitudinal statements regarding property, by television region, special groups and ACORN category, January 2006
- Implications and opportunities
- Mid-market tabloid readers favour security
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- Figure 54: Agreement with attitudinal statements regarding property, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, January 2006
- Implications and opportunities
- High property prices have led some recent buyers to choose non-traditional products
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- Figure 55: Mortgage ownership versus agreement with attitudinal statements regarding property, January 2006
- Traditional lenders are a favoured source
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- Figure 56: Attitudes toward choosing a new mortgage provider, January 2006
- A tenth of consumers would use a broker to source a mortgage
- ABs were most likely to state that they would use the Internet to arrange a mortgage
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- Figure 57: Attitudes towards choosing a new mortgage provider, by gender, age, socio-economic group and marital status, January 2006
- Implications and opportunities
- Higher income households give preference to the Internet
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- Figure 58: Attitudes towards choosing a new mortgage provider, by lifestage, gross annual household income, TV region and age/socio-economic group, January 2006
- Implications and opportunities
- Broadsheet readers favour the IFA route
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- Figure 59: Attitudes toward choosing a new mortgage provider, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, January 2006
- Implications and opportunities
- Marketing activities should reflect consumer sentiment
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- Figure 60: Mortgagor channel preference versus agreement with attitudinal statements regarding property, January 2006
- Consumer typologies
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- Figure 61: Remortgage targets, by type, January 2006
- Medium-term and Longer-term targets
- Shorter-term targets
- Satisfied
- Use London-centric media outlets for 'medium-term' customer acquisition
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- Figure 62: Remortgage typologies, by gender, age, socio-ecomonic group, lifestage, TV region and newspaper readership, January 2006
- Mortgagors are concerned about a repertoire of issues
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- Figure 63: Repertoire analysis of factors which would encourage remortgaging, January 2006
- Straight repayment holders were most vulnerable to change
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- Figure 64: Repertoire analysis of provider preference, by mortgage ownership, January 2006
Industry Views
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- FTBs are showing an increased willingness to purchase
- Stable interest rates will enable households to plan
The Future
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- Acquisition business
- Balancing the books will be a priority
- No-fee and low-fee deals may be used to encourage take-up
- Larger lenders might reduce their key brand exposure
- The Internet channel will grow in importance
Forecast
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- Gross advances will reach £392 billion by 2010
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- Figure 65: Forecast of gross advances by type of lending, 2005-10
- The number of mortgage loans outstanding will grow slowly over the next few years
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- Figure 66: Forecast of the number of mortgage loans outstanding, 2005-10
- Factors used in the forecast
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