Lending figures have been gently improving on the back of growing nationwide demand for housing, according to Legal & General Mortgage Club’s director, but continued increases in house prices are threatening to strangle the market by making homeownership less affordable.
Jeremy Duncombe told FTAdviser that he welcomed government housing initiatives like Help to Buy, but other sectors such as buy-to-let are under greater pressure and without a focus on a supply-side stimulus, so 2016 could see more people priced out of the market altogether.
A key concern for mortgage holders in 2016 is the increasing likelihood of an interest rate hike, amid an improving economy, he noted.
“This has the potential to impact on a whole new generation of homeowners, who have enjoyed historic low interest rates since 2009 and are yet to experience the impact of a rate rise on monthly mortgage repayments.”
Remortgaging is also likely to pick up in early 2016 as borrowers seek to benefit from the current low rates ahead of a rise.
Mr Duncombe said this would be a wise move, as acting now could potentially save borrowers thousands of pounds, or the equivalent to a pay rise.
“Those who leave a review of their mortgage till the last minute will find the rises already priced in by the banks well ahead of a rate hike.”
2016 is also likely to be a tough year for landlords, according to L&G, as the “double whammy” of a stamp duty tax and reduction in tax relief will hit the buy-to-let sector hard.
“Early 2016 could also see a rush in house purchases as landlords take advantage of the current, more favourable environment before these policies are implemented. Once it happens, the rest of the year could see a dampening of activity in buy-to-let.”
Mr Duncombe suggested that brokers would also do well to prepare themselves for yet more regulation in the form of the Mortgage Credit Directive in 2016, stating that they need to understand the changes it will bring to labelling advice independent, while they must also state their position on advising on second charge loans.
“Most importantly, they will need to register with the Financial Conduct Authority in order to be able to advise on consumer buy-to-let products post MCD. If brokers underestimate the changes in this new regulation, they could risk not being compliant with the new rules.”
More promising for intermediaries is their growing use as a channel for lenders in 2015, he added, which is benefiting lenders and borrowers alike.
“Growing this market will widen the access to customers, but more importantly it also means more people are getting the advice they need to secure competitive rates and products which best suit their needs.”
Finally, Mr Duncombe said L&G would also like to see more competition in the market in 2016. This year has seen many new lenders emerge across the market, broadening the product choice for borrowers.
peter.walker@ft.com
