Shifting sands in the mortgage market

It has been an interesting year in the housing and mortgage markets. Look at the key figures and it appears as if nothing much has happened: Bank of England base rate has stayed at 0.5 per cent all year, house prices have dropped just 1.3 per cent but stayed basically stable according to LSL’s Acadametrics house index and gross mortgage lending which reached £135.7bn in 2010, according to CML figures, looks like it will be very similar this year if just a little lower.

However these figures are a bit like the analogy of a swan on the water, it looks like little is happening on the surface, while under the water there is a lot of frantic activity.

Let us start with mortgages; lenders seem to have exhausted the supply of people with a 40 per cent deposit to put down, so they are now moving up the risk curve, offering higher LTVs and moving into the buy-to-let market.

Smaller lenders have had a growing part to play this year - Coventry, Precise and Aldemore have played a bigger role, offering innovative mortgages at much higher LTVs.

At the beginning of the year, the majority of buy-to-let lending was done by The Mortgage Works and BM Solutions. Today Moneyfacts lists seven different buy-to-let lenders on its top 10 page alone and that did not even include The Mortgage Works, BM Solutions or Northern Rock.

The buy-to-let market is obviously being fuelled by continually rising rents and the challenges that most first-time buyers are having getting onto the housing ladder.

Rents hit a new high of £720 a month in October according to the LSL buy-to-let index. This is up from £682 a month in January and rents have risen consistently every month this year, in some months, such as August, by as much as up by 1.2 per cent in just one month.

No one seems to know the exact number of mortgage advisers that are still in the market but most people seem to estimate that it is about 9000 or 10,000 down from in excess of 30,000 just three years ago. Things are tough out there, but while the number of mortgage advisers has dropped by more than two-thirds, the amount of lending has dropped by only half so the positive is that there is more business for each adviser than there was at the height of the boom back in 2007.

In addition we have seen a shift of focus, the advisers left in the market are no longer just ‘order takers’ for mortgages, there has been a definite swing to protection and general insurance sales as advisers diversify in order to widen their income streams and stay in business.

Networks are helping in this process by training advisers, helping with everything from online and printed sales material to in-depth face-to-face sales training with product providers presenting on the value and intricacies of their individual product ranges.

A number of well-known mortgage distributors have dropped out of the market over the last couple of years, and what has resulted is in 2011 is the emergence of four super-tankers in terms of distribution: LSL Property Services, Sesame Bankhall, Legal & General and Countrywide. Both LSL and Countrywide increased their dominance in the market this year, LSL by purchasing mortgage club TMA and Countrywide buying network Mortgage Intelligence.