The housing slump: Slowing market shakes up advisers' roles

The housing slump: Slowing market shakes up advisers' roles

Brexit has been on the receiving end of many a pointed finger since 2016, with political uncertainty seeping into all parts of the UK economy in its wake. It’s no surprise, therefore, that the UK’s prolonged departure from the EU has borne the brunt of the blame for the housing market slump seen in recent years.

In its February UK residential market survey, the Royal Institution for Chartered Surveyors found British house prices were growing at their weakest pace since 2011. 

Speaking at the time, Simon Rubinsohn, chief economist at RICS, said: “Although activity in the housing market continues to be weighted down by the lack of available stock, changes in the tax regime affecting property, and affordability, feedback to the latest RICS survey makes it pretty clear that the ongoing uncertainty around how Brexit will play out is the critical factor influencing both buyers and sellers.”

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One month later, the subsequent RICS survey saw demand from buyers remain in negative territory and a continuing decline in sales and new property coming on to the market. The “Brexit impasse” was again identified as the most prominent drag on activity.

The slowdown has already taken hold in London and the South East, as Chart 1 shows. Many analysts expect this trend to extend to other regions in the coming months. But mortgage advisers haven’t had as bad a time of things as this may suggest: several parts of the market are either flourishing or providing them with a window of opportunity to aid clients.

Later life

Chief among these are developments that relate to existing property owners, bolstered by the rapid price rises of previous years, seeking to make better use of their stores of capital. As one mortgage broker puts it: “Family-assisted borrowing has been a significant change, with rising property prices meaning more offspring relying on family members to help them on to the housing ladder. Outside of Help to Buy, an increasing number of lenders are trying to innovate in this area.”

It is equity release that is the most notable boom area. The rise of later-life lending has been gathering pace at a rapid clip in recent years. The Equity Release Council’s spring 2019 market report confirmed that demand for equity release has continued to grow across all UK regions, with lifetime mortgages in particular witnessing a rise of 25 per cent between 2017 and 2018. 

Lifetime mortgages are now estimated to account for a third of all mortgages taken out by homeowners from their mid-50s onward, compared with less than a fifth 10 years ago.  

Chart 2 shows the rate of growth over the past seven years.

The surge in demand is now being belatedly accompanied by the arrival of big name players. In April, building society Nationwide became the first major lender to offer equity release and interest-only retirement mortgages. The likes of Legal & General and Barclays are set to follow suit later this year and in 2020, respectively.

The risks associated with these products often necessitate the help of an adviser. Mark Harris, chief executive of SPF Private Clients, points to later-life lending as a growing area of opportunity in the market, noting that the associated tax, pension, debt and estate considerations also make it an area where advice is essential.