I am expecting 2016 to be a fascinating year for mortgage lenders and for the wider housing market. After nearly a decade of activity dominated by the effects of the credit crunch and the regulatory response, new drivers for the market are emerging.
Firstly and most important is the delivery of the government’s housing agenda. This is big stuff that will really kick off in 2016. The challenge should not be underestimated. We have a housing deficit of over 1m homes, and the number of households with a mortgage has been falling since 2001.
Primarily focused on first-time buyers, the combination of starter homes, various help-to-buy initiatives, shared ownership, right-to-buy, custom build and the constraints on the buy-to-let market all seem to combine to create a ‘generation buy’ out of the current ‘generation rent’.
This welcome revolution will require changes to our approach to housing and changes to our approach to lending. As with any revolution there are risks. Long-term quality is in danger of being sacrificed as we look to build more homes in new ways and lending structures designed to support and improve access to the market may instead act to simply drive up prices.
This has happened in the past with the tower blocks of the 1960s and with some poor quality housing from builder-lender schemes in the 1930s. We should not be deterred by these risks but we should be mindful of the lessons from the past, and of the need for ongoing management of these initiatives beyond the excitement of their initial launch. Government, builders and lenders need to continue to work together and to challenge themselves on the quality of their consumer outcomes.
A focus on the customer, the house-buyer, leads on to my second key theme for this year. With the delivery of the EU Mortgage Credit Directive in March 2016 we will see the last of the major set piece regulatory changes that followed the credit crunch. And now there is a new regulatory wind blowing. This one is focused more on customer outcome and on improving competition. These are harder concepts to document and formalise but ultimately a preferable lens through which to oversee the market.
Lenders have shown a willingness to respond to this challenge, without the need for regulatory intervention. The ongoing project with Which? aims to improve the ability of customers to understand the market and support their ability to make better informed decisions.
Helping consumers better understand the market and supporting their ability to make more informed choices are themes likely to feature in the FCA’s Mortgage Market Study, areas where lenders should not need regulatory interventions to make the market work better for consumers. Existing customers for example should not find deals for new customers that are not available to them, or find there is not full transparency on the rates available to them when they are considering a new deal.
As part of this process we can expect to see greater focus on providing access to those segments of the mortgage market that have recently been underserved. This is likely to include lending in and into retirement, lending for affordable housing schemes, and for self and custom build. While these journeys may not be completed during 2016 we can expect a greater appetite and energy for change.
The messages here are about renewed focus on building and society, with mortgages and mortgage lenders at the very heart of all that is happening. Get this right and lenders can rebuild their reputations in delivering a home of one’s own for a new generation of house buyers. They can create an open and transparent market where more feel empowered to save to buy and to ensure that their mortgage remains right for them.
One last message for all those hoping to buy their first house before 2030 but who are yet to open their Help to Buy ISA – what are you waiting for?
Andrew Baddeley-Chappell is Nationwide’s head of policy and governance (mortgages & savings)
