The start of any year brings with it the hope and possibility of the new but possibly the start of a new decade increases that ten-fold.
With 2020 barely days old, and the slow return to work underway, what might we hope for over the course of the next 12 months or indeed the next 10 years?
Ironically, the start of 2020 seems to herald more of the same, with an added dose of political certainty brought about by last month’s General Election, the Conservative Party win, and the suggestion that housing market policies might now be more positive for transactions than they have been for some time.
In a sense the market appears to be holding its breath – and perhaps putting all its eggs in the policy basket marked ‘stamp duty changes’. The next Budget should not be too far away, and there will undoubtedly be a real sense of disappointment should the Chancellor not deliver on this. We await that announcement with interest and hope it provides a considerable catalyst to activity.
Overall, however, we can probably look forward to a year of benign house price growth, continuing in the region of 1-3% according to the Halifax, while UK Finance recently suggested that gross mortgage lending will fall by a small amount in 2020 compared to last year – down to £254bn from an anticipated £264bn over the previous 12-month period.
This drop is pretty much across the board, according to the trade body, with both purchase mortgages and remortgages falling – whether that truly plays out in this way remains to be seen, but I suspect advisers will need to keep a watchful eye on one part of the market.
Of all the mortgage sectors, it is product transfer which is predicted to grow. According to UK Finance it will be up to £164bn from £158bn in 2019. The intermediary community (at present) takes a majority share of this business, but lenders are targeting more of this business direct, and advisers also have to be conscious of the fact that their ability to keep clients long-term could be impacted by conducting more product transfer business. Ditto execution-only, although why advisers would be recommending this is anyone’s guess.
What we would not wish to see in the years ahead is a false sense of security in the advisory market. Yes, MMR provided a considerable boost to advisers’ business but the FCA has been pretty blunt in its recent missives – setting the groundwork for more execution-only, more use of technology to bypass advice, and a focus on customers who, in its opinion, do not need advice and have not made any savings as a result of taking it.
That focus on price is a considerable sea-change from the MMR and, if the FCA pursues these policies throughout the next 10 years, then advisers will need to fight harder and harder for their business. The positive of course is that advice has never been so necessary and customers – with all the product choice and complexity – could be impacted negatively if they believe they can choose the best mortgage for them.
Ten years is a long time to look ahead, but it seems obvious to say that the focus on climate change, the need to cut emissions, and the ‘green economy’ will seep into the mortgage market. For those borrowers who diminish the carbon footprint of their own home, there are likely to be rewards in terms of lower rates, but we can also anticipate an increase in the regulatory/legislative requirements when it comes to the EPC of properties.
We’re already seeing that in the rental space with all PRS properties needing to be of a specific grade and it seems an obvious area to focus on for Governments who want greater energy efficiency right across the board. Weather extremes will also impact on certain areas of the country and we may well see lenders deciding not to lend in newer regions of the UK who now appear more prone to flooding, etc, than in the past. It will not need us to gaze into the crystal ball to see the significant numbers of homeowners that could be impacted by this.
The 2020s are likely to be a green-focused decade – or at least they should be. The outgoing Governor of the Bank of England, Mark Carney, has already expressed concern about how global warming/climate change could impact on investment decisions and pension funds. Across the board, financial decisions will need to be couched in these terms, and the mortgage market is no different.
Advisers have the opportunity to continue the growth of their advisory services and products, but must respect the challenges that exist, and plan and prepare accordingly. A view of the bigger picture can be illuminating and it’s fair to say our changing environment is going to have a major say in all our lives – both personal and business.