Table of Contents
Introduction
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- Market definitions
- Abbreviations
Executive Summary
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- The market
- A large target market
- New business crept up by the narrowest of margins in 2012…
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- Figure 1: Forecast of gross new mortgage lending (at current prices), 2007-17
- …driven by growth in the house purchase sector
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- Figure 2: Gross mortgage lending, by type of loan, 2007-12
- Varied performance by type of lender
- A cautious outlook, albeit with some encouraging signs
- Market factors
- Regulatory developments
- Conditions in the wider housing market
- Companies, brands and innovation
- Product innovation
- Mixed results for the top six lenders
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- Figure 3: Market shares of the top six mortgage lenders, by gross advances, 2012
- Distribution mix: intermediaries start to wrestle back share
- Lenders cut back on advertising in 2012
- The consumer
- Mortgage ownership falls
- Mintel’s consumer research: mortgage application intentions
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- Figure 4: Mortgage application intentions within the next 12 months, December 2012
- The typical mortgage borrower and first-time buyer applicant
- The most sought-after product feature is a fixed interest rate
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- Figure 5: Features most wanted from new mortgage product or provider, December 2012
- Mortgage debt-servicing behaviour by existing borrowers
- Sources used to research or arrange a mortgage
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- Figure 6: Sources expected to use when researching or arranging new mortgage/remortgage, December 2012
- Expected house price movements
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- Figure 7: Expected house price movement over the next year, by potential mortgage and remortgage applicants, December 2012
- General attitudes towards buying and owning property
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- Figure 8: Agreement with statements about buying and owning property, December 2012
- What we think
Issues in the Market
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- Why is home ownership declining?
- And how are house prices contributing to the problem?
- So how much demand is there to buy property?
- What are the main implications of the MMR?
- What is the future for interest-only mortgages?
- How much competition is there in the market?
- What is the outlook for new mortgage lending?
Trend Application
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- Develop apps that motivate would-be buyers to save for their first home deposit
- Personalise the service to retain business
- Adapt mortgage terms to cater for increasing longevity
Market Drivers
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- Key points
- Regulation round-up
- Key dates to note
- Financial crisis sparked the need for change
- Summary of the main MMR reforms
- Sensible measures, which most lenders have already adopted
- Interest-only loans permitted, in theory at least
- Arrears management
- Less emphasis on ‘generic’ disclosure, instead greater use of targeted information
- Second-charge loans will come under FCA remit
- Other changes in the pipeline
- The UK lending environment
- Market liquidity improves
- Lenders continue to see decent margins on new lending
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- Figure 9: Bank of England base rate, three-month (monthly average) LIBOR and effective new mortgage rate, January 2007-December 2012
- FLS prompts lenders to adjust their pricing of fixed-rate deals
- Mortgage approvals driven by lending for house purchase
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- Figure 10: Number of quarterly mortgage approvals (seasonally adjusted), by type, Q1 2007-Q4 2012
- Mortgage debt write-offs remain steady
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- Figure 11: Quarterly write-offs of lending to individuals, by sector, Q1 2007-Q4 2012
- Decline in repossessions and number of mortgages in arrears
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- Figure 12: Number of mortgage arrears (as at end of three-month period) and quarterly repossessions, Q1 2009-Q4 2012
- SMI scheme extended to March 2015
- Macroeconomic and wider housing market factors
- Economic backdrop: there is some cause for optimism
- Consumer sentiment languishes in negative territory
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- Figure 13: GfK Consumer Confidence Barometer – UK, January 1989-January 2013
- Mortgage and house buying intentions increase
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- Figure 14: Expected mortgage and property purchase activity, quarterly indices, Q3/Q4 2002-Q4/Q1 2013
- House prices have broadly stabilised over the past two years
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- Figure 15: Annual change in average UK house price – comparison of four sources, Q1 2007-Q4 2012
- Housing transactions still running well below pre-crisis levels
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- Figure 16: Number of UK residential property transactions with a value of £40,000 upwards – seasonally adjusted, Q1 2007-Q4 2012
Trends in Housing Tenure
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- Key points
- Owner-occupied dwellings as a share of total housing stock have steadily declined since 2006
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- Figure 17: UK housing stock, by tenure, 1991-2011
Market SWOT Analysis
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- Figure 18: UK Mortgage market – SWOT analysis, 2013
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Who’s Innovating?
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- Key points
- Mortgage availability improves, but there’s limited appetite for new product innovation
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- Figure 19: Number of residential mortgage products available, by selected LTV, 2009-13 (selected months)
- Lenders are starting to more aggressively target the first-time buyer market
- Some competition starts to seep into the market…
- …and a few new entrants emerge
Market Size and Forecast
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- Key points
- Gross new lending edged up slightly in 2012, while net lending declined
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- Figure 20: Total secured lending, by gross and net advances (not seasonally adjusted), 2006-12
- Redemptions have fallen over the past two years
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- Figure 21: Mortgage repayments, by type (not seasonally adjusted), 2006-12
- Mintel expects the market to recover steadily over the next five years
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- Figure 22: Forecast of gross secured lending – fan chart, 2007-17
- Figure 23: Forecast of gross secured lending, at current and constant prices, 2012-17
- Forecast methodology
- Fan chart explanation
Segment Performance
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- Key points
- Mutuals significantly outperformed the banks in 2012
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- Figure 24: Gross mortgage lending, by type of lender (not seasonally adjusted), 2006-12
- House purchase lending up 7% in 2012, but remortgage business fell
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- Figure 25: Gross mortgage lending, by type of loan, 2006-12
- First-time buyer loans reached their highest level in five years
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- Figure 26: Loans advanced for house purchase, by type of borrower, 2006-12
- Mortgage PSD trends
Market Share
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- Key points
- Three of the top six lenders reduced their mortgage lending in 2012
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- Figure 27: Top six mortgage lenders, by gross advances, 2010-12
- LBG’s overall share of the mortgage market had fallen to just under 26% at the end of 2012
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- Figure 28: Top six mortgage lenders, by outstanding mortgage balances in the UK, 2011 and 2012
Companies and Products
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- Barclays
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- Figure 29: Key annual financial data for Barclays Plc, 2011 and 2012
- HSBC
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- Figure 30: Key annual financial data for HSBC Bank Plc, 2011 and 2012
- Lloyds Banking Group
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- Figure 31: Key annual financial data for Lloyds Banking Group, 2011 and 2012
- Nationwide Building Society
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- Figure 32: Key interim financial data for Nationwide Building Society, H1 2011 and H1 2012
- RBS/NatWest
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- Figure 33: Key annual financial data for RBS Group, 2011 and 2012
- Santander
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- Figure 34: Key annual financial data for Santander UK, 2011 and 2012
Brand Communication and Promotion
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- Key points
- Lenders reduced their advertising budgets in 2012
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- Figure 35: Total advertising expenditure on mortgage products and services, 2008-12
- The largest share of industry adspend in 2012 went on brand building
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- Figure 36: Advertising expenditure on mortgage products and services, by sub-product category, 2008-12
- Halifax was the leading mortgage advertiser in 2012
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- Figure 37: Advertising expenditure on mortgage products and services (excluding equity release), by top 15 advertisers, 2010-12
- Press and TV account for most of the industry’s adspend…
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- Figure 38: Proportional distribution of mortgage adspend (excluding equity release), by media type, 2010-12
- …but online advertising is growing in importance
Channels to Market
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- Key points
- Intermediary share growing steadily
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- Figure 39: Proportional distribution of regulated mortgage sales, by channel, 2007/08-2011/12
- Greater focus on ‘advised’ sales should help bolster the mortgage brokerage market
Mortgage Ownership Trends
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- Key points
- Mortgage penetration has declined steadily over the past decade
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- Figure 40: Proportion of adults who have a mortgage, 2003-12
- The typical mortgage customer is aged 35-54
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- Figure 41: Mortgage penetration and profile of mortgage borrowers, by demographics, 2012
- Three quarters of mortgages are jointly held
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- Figure 42: Mortgage held solely or jointly with another person, 2012
- Around three in five mortgage borrowers have held their mortgage for over five years
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- Figure 43: When mortgage was first taken out, 2008-12
- Around one in six have a mortgage term longer than 25 years
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- Figure 44: Length of mortgage term, 2012
- First-time homeowners account for around two fifths of the market
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- Figure 45: Proportion of borrowers whose current mortgage is for their first property, 2008-12
- Around one in six have an interest-only mortgage
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- Figure 46: Type of mortgage held, 2008-12
- One in 13 mortgage holders are paying £1,000+ a month in mortgage repayments
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- Figure 47: Value of monthly mortgage repayments, 2012
- The proportion of borrowers remortgaging has fallen over the past five years
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- Figure 48: Proportion of mortgage borrowers who have remortgaged in the past year, 2008-12
- Just under a quarter of borrowers have increased their mortgage debt
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- Figure 49: Proportion of mortgage borrowers who have increased their mortgage debt, 2008-12
Mortgage Application Intentions
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- Key points
- Survey background
- Segmentation of sample by housing tenure
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- Figure 50: Current housing tenure, December 2012
- Strong mortgage intentions indicate considerable pent-up demand
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- Figure 51: Mortgage application intentions within the next 12 months, by current tenure, December 2012
Most Desirable Product Features
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- Key points
- Prospective applicants are keen on fixing their mortgage repayments
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- Figure 52: Features most wanted from new mortgage product/provider, by type of home buyer, December 2012
- The relative importance of different product features
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- Figure 53: Relative importance of features among the five selected, December 2012
Sources Used to Assist Product Selection
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- Key points
- The internet has evolved into a valuable consumer research tool
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- Figure 54: Sources expected to use when researching or arranging new mortgage/remortgage, by type of home buyer, December 2012
- Mortgage prospects are more inclined to seek advice from their existing bank than a rival one
Mortgage Repayment Activity
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- Key points
- A third of mortgage holders are striving to pay off their mortgage quicker
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- Figure 55: Mortgage repayment and debt-servicing behaviour, December 2012
- A customer’s financial situation will heavily influence their ability to overpay and their propensity to fall into arrears
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- Figure 56: Mortgage repayment and debt-servicing behaviour, by current financial situation, December 2012
Attitudes towards House Prices and Buying Property
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- Key points
- Most people expect house prices to remain level in 2013
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- Figure 57: Expected house price movement over the next year, by potential mortgage and remortgage applicants, December 2012
- Over three quarters of UK adults think house prices remain ‘out of reach’ for most first-time buyers
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- Figure 58: Agreement with statements about buying and owning property, December 2012
- Nearly two fifths of prospective applicants think they’d struggle to get a mortgage or remortgage
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- Figure 59: Agreement with statements about buying and owning property – by potential mortgage applicants only, December 2012
Appendix – Market Forecast
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- Figure 60: Best and worst case forecasts for gross mortgage lending, 2012-17
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Appendix – Current Tenure and Mortgage Application Intentions
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- Figure 61: Tenure, by demographics, December 2012
- Figure 62: Mortgage application intentions, by demographics, December 2012
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Appendix – Most Desirable Product Features
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- Figure 63: Top six features most wanted from a mortgage product, by demographics, December 2012
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Appendix – Sources Used to Assist Product Selection
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- Figure 64: Top five sources expected to use when researching or arranging mortgage/remortgage, by demographics, December 2012
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Appendix – Mortgage Repayment Activity
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- Figure 65: Mortgage repayment and debt-servicing behaviour, by demographics, December 2012
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Appendix – Attitudes towards House Prices and Buying Property
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- Figure 66: Expected house price movement over the next year, by demographics, December 2012
- Figure 67: Proportion who agree with statements about owning property and getting a mortgage, by demographics, December 2012
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