Table of Contents
Introduction and Abbreviations
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- Scope of the report
- Consumer research
- Abbreviations
Premier Insights
Executive Summary
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- Total mortgage debt increased to £766 billion in 2003
- Low interest rates are key selling points
- Property transactions decline
- Remortgaging business will be sustained in 2004
- The number of first-time buyers also declines
- House price correction
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- Figure 1: House price to earnings ratio, 1970-2003
- Upwards creep in interest rates
- The value of bank-supplied mortgages increased to £510 billion in 2003
- Mortgage churn and customer retention
Market Factors
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- The mortgage sector benefits from outside events
- The number of property transactions declines in 2003
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- Figure 2: Property transactions in England and Wales, 1970-2005
- Factors supporting the decline in property transactions
- Real house prices continue to rise despite a decrease in transactions
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- Figure 3: Real house prices, 1970-2005
- Average house prices increase across all UK regions
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- Figure 4: Average house prices, by region, third quarter 2003
- Increase in house price to earnings ratio
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- Figure 5: House price to earnings ratio, 1970-2003
- Low initial repayments encourage market growth
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- Figure 6: Initial mortgage repayment to income ratio, FTBs, 1970-2003
- Taxes and interest rates could slow the market
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- Figure 7: Bank of England base interest rate, January 1992-March 2004
- The impact of interest rate rises will serve to change the dynamics of the market
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- Figure 8: Impact of interest rate rises for mortgage holders, by degree of change, 2003
- Consequences of rising debt on graduate FTBs
- FTBs innovate to enter the housing market
- The level of household disposable income compared to debt
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- Figure 9: Mortgage debt to households’ disposable income, 1975-2003
- Unemployment count lowest since records began
- Increasing disposable income invigorates the housing market
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- Figure 10: Real household disposable income, 1998-2007
- Repossessions and arrears remain low
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- Figure 11: Repossessions and arrears as a proportion of total mortgages, 1986-2003
- Flexible mortgages and the ‘one-stop shop’
- Consumers seek flexible loans as a means of protection
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- Figure 12: Characteristics of loans with and without a facility for underpayments or payment holidays, Q1 2002-Q3 2003
- Offset mortgages and one account
- The changing status of households stimulates housing demand
- Proportion of mortgagors stagnates
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- Figure 13: Proportion of owner-occupied housing stock, 1980-2003
- Review of housing supply published in March 2004
- Government regulations will help to shape the market in 2004
- Integrating the UK with the European Union
- The Basel Accord
- Mis-selling will increase costs
- Selected FSA regulations which cover the mortgage market
- Consumer Credit Act review
- The Miles Report analysed the long-term fixed rate mortgage market
Market Size
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- The number of mortgage accounts reaches 11.5 million
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- Figure 14: Total number of mortgages, 1995-2003
- Total mortgage debt grows to £766 billion
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- Figure 15: Total mortgage debt and annual growth rates, 1986-2003
- Average consumer mortgage debt was £67,000 in 2003
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- Figure 16: Average mortgage debt per mortgage account, 1995-2003
- Gross and net lending both rise significantly in 2003
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- Figure 17: Net and gross lending secured on dwellings, 1995-2003
- Value of remortgaging increases by £40 billion in 2003
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- Figure 18: Gross advances, by type of lending, 1993-2003
- Mortgage churn continues to trouble the industry
- Combating churn using retention strategies
- Growing equity levels fuel the remortgage battle – average equity withdrawal is £27,000
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- Figure 19: Household equity levels, by region, 2003 Q4
- MEW grows to £51 billion
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- Figure 20: Value of mortgage equity withdrawal, 1999-2003
- The number of FTBs tumbles in 2003
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- Figure 21: Loans for house purchase, by type of borrower, 1997-2003
- Uptake of fixed rate loans increases in 2003
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- Figure 22: Fixed rate and variable rate loans for house purchase, by type of product, 2000-03
- Bank balance reaches £510 billion
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- Figure 23: Mortgage balances outstanding, by type of institution, 1994-2003
- Buy-to-let mortgages increase rapidly
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- Figure 24: Buy-to-let mortgages, 1998-2003
Key Players and Competitor Analysis
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- Overview of the mortgage market
- The largest mortgage lenders ranked by assets
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- Figure 25: Largest mortgage lenders, ranked by residential mortgage assets, 2002
- Mergers in 2003
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- Figure 26: Selected mergers and acquisitions, 2003
- The Post Office moves to offer mortgages
- Company snapshots
- Abbey
- Alliance & Leicester
- Barclays Bank
- Bradford & Bingley
- HBOS
- HSBC
- Lloyds TSB Group
- Nationwide Building Society
- Northern Rock
- The Royal Bank of Scotland
Product Development
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- Self-certification mortgages designed to meet changing work patterns
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- Figure 27: Number of people self-employed, by gender, 1984-2003
- The sector has faced some adverse publicity
- Penalised for loyalty – the Miles Report addresses cross-subsidisation
- The mutuals may be missing a trick
- Rise in additional charges may impact discounted products
Distribution
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- Large lenders offer one-stop shop convenience
- Introduction channels
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- Figure 28: Percentage of mortgage stock arranged directly with the lender, 1996-2003
- Developing a direct mortgage brand
- Introducers play a strategic role in generating business for small to medium lenders
- Meeting customer demand with new brands and distribution channels
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- Figure 29: Selected direct channel services and their parent companies
- Market consolidation opens new distribution channels
- Regulation may cause a change in distribution patterns
Advertising and Promotion
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- FSA and Consumer Credit Act regulation of advertising
- Lenders spent £62 million on advertising
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- Figure 30: Total adspend on mortgage products, by media type, 2002 and 2003
- The most popular advertising medium is the press
- TV advertising is the second most popular choice with lenders
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- Figure 31: Major mortgage advertisers, combined above- and below-the-line expenditure, 2002 and 2003
- New entrants harness the power of advertising
- Lenders focus on general advertising and equity release
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- Figure 32: Advertising expenditure, by selected mortgage type, 2003
The Consumer
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- One in three adults hold a mortgage
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- Figure 33: Ownership rates for selected financial products, by gender, January 2004
- The majority of mortgagors prefer straight repayment mortgages
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- Figure 34: Ownership of mortgages, by type of loan, January 2004
- New products yet to have a major impression on the market
- Repayment mortgages lead in 2004 as endowments decline
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- Figure 35: Ownership of mortgages, by type of loan, 2001 and 2004
- All-in-one products rise
- The main age range for mortgage holders is 25-54
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- Figure 36: Ownership of mortgages, by gender, age and socio-economic group, January 2004
- High mortgage ownership among Internet users
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- Figure 37: Ownership of mortgages, by new technology usage and newspaper readership, January 2004
- Broadsheet readers most likely to own a mortgage
- High mortgage ownership among Sainsbury’s and Morrisons shoppers
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- Figure 38: Penetration of mortgage products, by supermarket usage and television viewing, January 2004
- Some 13% of mortgage owners intend to switch lender
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- Figure 39: Attitudes towards remortgaging, January 2004
- Most plan to stay with their current lender
- Changing attitudes towards remortgaging
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- Figure 40: Attitudes towards remortgaging, 2001 and 2004
- Retaining customers in a competitive business
- Young adults and older people most likely to stay with original provider
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- Figure 41: Attitudes towards remortgaging, by gender, age and socio-economic group, January 2004
- Some 22% of over-55s have remortgaged and changed their provider
- Tabloid readers most likely to still have their original mortgage
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- Figure 42: Attitudes towards remortgaging, by new technology usage and newspaper readership, January 2004
Consumer Attitudes and Targeting Opportunities
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- Key Consumer Findings
- Low rates most likely to attract new customers
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- Figure 43: Key influences on the mortgage decision, January 2004
- Flexible repayments are valued
- Reputation rated highly among borrowers
- Highest income multiples least influential
- People aged 18-24 are more likely to be influenced by personal advice
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- Figure 44: Key influences on the mortgage decision, by gender, age and socio-economic group, January 2004
- Branches are the primary sales channel for mortgage products
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- Figure 45: Preferred mortgage distribution channel, January 2004
- IFAs are second most preferred outlet
- Telephone services grow in importance
- Preference for branch transactions increases with age
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- Figure 46: Preferred mortgage distribution channel, by gender, age, socio-economic group, new technology usage and newspaper readership, January 2004
- Remote distribution channels and specialised mortgage lenders
- Sainsbury’s customers least attached to the branch network
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- Figure 47: Preferred mortgage distribution channel, by supermarket usage and commercial television viewing, January 2004
- People using remote channels are most influenced by competitive interest rates
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- Figure 48: Key influences on the mortgage decision, by distribution channel, January 2004
- Consumer target groups
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- Figure 49: Penetration of the three mortgage target groups, by gender, age and socio-economic group, January 2004
- Family groups are likely to be Rate Driven
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- Figure 50: Penetration of the three mortgage target groups, by lifestage and Mintel’s Special Groups, January 2004
- Retailers offer opportunities for the promotion of mortgages
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- Figure 51: Penetration of the three mortgage target groups, by new technology usage, newspaper readership, supermarket usage and commercial TV viewing, January 2004
- Over-35s should be targeted to switch their endowment product
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- Figure 52: Analysis of mortgage owners and source of mortgage using CHAID, January 2004
The Future
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- Rise in base rates at turn of the year
- Will the housing market slow down significantly?
- Mortgage customer retention
- Winners in the remortgage battle
- Can the remortgaging boom continue?
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- Figure 53: Value of remortgaging and proportion of total lending, Q1 2001-Q4 2004
- ‘Soft landing’ will sustain the trend to remortgage
- The future role of APR
- Loyalty must start to count for something
Forecast
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- Figure 54: Forecast of the number of mortgage accounts, 2003-07
- Figure 55: Forecast for gross advances, by type of lending, 2003-07
- Factors used in the forecast
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