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Mortgages - UK - March 2016

“As the population ages and many can only arrange a mortgage later in life, lenders must prepare to adapt to change in terms of market dynamics and customer profile. Removing barriers to purchase is set to characterise the market over the coming years.”
– Patrick Ross, Financial Services Analyst

This report discusses the following key topics:

  • Mortgage lending must adapt to meet an aging population
  • Customers could be exposed by changes in interest rates
  • Do mortgages and mobile technology really mix?

In 2015, lenders and intermediaries were able to better coordinate their approach to the market following the upheaval caused by the Mortgage Market Review (MMR) in the previous year. The MMR represented the greatest regulatory change for more than a decade, meaning that lenders had to devote a large share of their resources to coming to terms with the new environment. Lenders have also started to work more flexibly within the more closely regulated market, using transitional arrangements to help borrowers that are effectively trapped by stricter lending criteria. Lenders will need to go a step further to keep the market accessible for key demographics, particularly the growing proportion of older people looking to borrow into retirement. Low interest rates have produced some great value deals, but not everyone has access to these and this mismatch could have the potential to slow growth in lending.

This report analyses the residential mortgage market, covering the impact of the regulatory upheaval, the outlook for gross mortgage lending and the changing shape of product distribution. Mintel’s consumer research looks at product ownership in the context of the interest rate environment as well as attitudes towards products and providers.

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The market
          • Gross mortgage lending expected to reach £336 billion in 2020
            • Figure 1: Forecast of gross mortgage lending, 2010-20
          • Companies and brands
            • Smaller lenders make good progress but traditional names dominate
              • Figure 2: Leading residential mortgage providers, market share by gross new mortgage lending, 2015
            • Traditional banks succeed despite profiteering image
              • Figure 3: Attitudes towards and usage of selected finance brands, November 2015
            • The consumer
              • A third of people hold a mortgage on their main home
                • Figure 4: Mortgage ownership, December 2015
              • Expectation of a rise in interest rates have driven fixed-rate mortgage sales in the last year
                • Fear of interest rate rise encourages uptake of fixed rate mortgages
                  • Figure 5: Type of mortgage held, December 2015
                • Few are confident that their mortgage is the best option for them
                  • Figure 6: Satisfaction with current mortgage product and provider, December 2015
                • Interest in overpayment indicates growing confidence
                  • Figure 7: Interest in features of a new mortgage product, December 2015
                • 39% of renters don’t think they’ll ever be able to afford their own home
                  • Figure 8: Attitudes towards property ownership and mortgages, December 2015
                • What we think
                • Issues and Insights

                  • Mortgage lending must adapt to meet an aging population
                    • The facts
                      • The implications
                        • Customers could be exposed by changes in interest rates
                          • The facts
                            • The implications
                              • Do mortgages and mobile technology really mix?
                                • The facts
                                  • The implications
                                  • The Market – What You Need to Know

                                    • Gross mortgage lending to build momentum in 2016
                                      • Housebuilding continues to fall short
                                        • Broker channel dominates following MMR
                                        • Market Size and Forecast

                                          • Gross mortgage lending accelerated through 2015
                                            • Figure 9: Gross mortgage lending, not seasonally adjusted, 2011-15
                                            • Figure 10: Quarterly gross mortgage lending, not seasonally adjusted, 2013-15
                                          • Gross mortgage lending expected to reach £336 billion in 2020
                                            • Figure 11: Forecast of gross mortgage lending, 2010-20
                                            • Figure 12: Forecast of gross mortgage lending, at current and constant prices, 2009-19
                                          • Forecast methodology
                                          • Market Segmentation

                                            • Re-mortgages recover after suffering under MMR
                                              • Figure 13: Value of new mortgages by purpose of loan, not seasonally adjusted, 2011-15
                                              • Figure 14: Number of new mortgages by purpose of loan, not seasonally adjusted, 2011-15
                                          • Market Drivers

                                            • House price growth shows signs of cooling
                                              • Figure 15: Annual change in average UK house prices – Comparison of four sources, Q1 2008-Q3 2015
                                            • Low interest rates continue to support mortgage ownership
                                              • Figure 16: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for 2 year variable rate mortgage at 75% loan to value, 2 year fixed-rate mortgage at 75% loan to value and standard variable rate (SVR), January 2010-February 2016
                                            • Housebuilding has recovered but must grow further
                                              • Figure 17: Number of permanent dwellings started and completed, 2007-08/2014-15
                                            • MMR rules have reshaped the market in favour of advice
                                              • European Union Mortgage Credit Directive burden for second mortgage providers
                                              • Channels to Market

                                                • Broker channel takes precedence following the MMR…
                                                  • Figure 18: Distribution of regulated mortgage sales, direct versus intermediated, 2009/10-2014/15
                                                • …and almost all mortgage sales are now advised
                                                  • Figure 19: Distribution of regulated mortgage sales, advised versus non-advised, 2009/10-2014/15
                                              • Key Players – What You Need to Know

                                                • Smaller lenders make good progress but traditional names dominate
                                                  • Building societies push to differentiate from banks
                                                    • Lenders look to sweeten the deal beyond the interest rate
                                                    • Market Share

                                                      • Smaller lenders make good progress but traditional names dominate
                                                        • Figure 20: Selected mortgage providers, market share by gross new mortgage lending, 2015
                                                        • Figure 21: Selected mortgage providers, market share by gross new mortgage lending, 2013-15
                                                    • Brand Research

                                                        • What you need to know
                                                          • Brand map
                                                            • Post Office and Nationwide lead on trust
                                                              • Figure 22: Attitudes towards and usage of selected finance brands, November 2015
                                                            • Key brand metrics
                                                              • Nationwide also leads on offering an excellent experience
                                                                • Figure 23: Key metrics for selected finance brands, November 2015
                                                              • Brand attitudes: Traditional banks cluster around good quality and customer service
                                                                • Figure 24: Attitudes, by brand, November 2015
                                                              • Brand personality: Santander advertising promotes fun and vibrancy
                                                                • Figure 25: Brand personality – Macro image, November 2015
                                                              • HSBC, Barclays and Lloyds seen as impersonal
                                                                • Figure 26: Brand personality – Micro image, November 2015
                                                              • Brand analysis
                                                                • Traditional banks succeed despite profiteering image
                                                                  • Nationwide and Halifax take strength from fair and progressive image
                                                                    • The Post Office is unbeatable for awareness and reputation
                                                                      • Co-op suffers from recent poor press
                                                                      • Competitive Strategies

                                                                        • Help to Buy ISA presents opportunity for early engagement with savers
                                                                          • Halifax
                                                                            • Santander
                                                                              • The rest of the market
                                                                                • Lenders offer sweeteners to compete beyond rates
                                                                                  • Nationwide
                                                                                    • Halifax
                                                                                      • Virgin Money
                                                                                        • Barclays
                                                                                        • Advertising and Marketing Activity

                                                                                          • TV advertising is extended to capture the growing first-time buyer market
                                                                                            • Figure 27: Above-the line, online display and direct mail advertising expenditure on mortgages, 2013-15
                                                                                          • Brand building dominates advertising spend
                                                                                            • Figure 28: Above-the line, online display and direct mail advertising expenditure on mortgages, by product type, 2015
                                                                                          • HM Treasury invests in promoting government schemes
                                                                                            • Figure 29: Top 20 advertisers for above-the line, online display and direct mail advertising expenditure on mortgages, 2013-15
                                                                                          • Nielsen Media Research coverage
                                                                                          • The Consumer – What You Need to Know

                                                                                            • A third of people hold a mortgage on their main home
                                                                                              • Low interest rates encourage uptake of fixed rate mortgages
                                                                                                • Online research is a crucial starting point for many
                                                                                                  • Delivering the flexibility customers want is a challenge for lenders
                                                                                                    • Interest in overpayment indicates growing confidence
                                                                                                      • 39% of renters don’t think they’ll ever be able to afford their own home
                                                                                                      • Mortgage Ownership

                                                                                                        • A third of people hold a mortgage on their main home
                                                                                                          • Figure 30: Mortgage ownership, December 2015
                                                                                                        • Single people struggle to get on the housing ladder
                                                                                                          • Figure 31: Mortgage ownership, by marital status, December 2015
                                                                                                      • Type of Mortgage Held

                                                                                                        • Fear of interest rate rise encourages uptake of fixed rate mortgages
                                                                                                          • Figure 32: Type of mortgage held, December 2015
                                                                                                        • Over-45s more likely to hold SVR mortgages than younger age groups
                                                                                                          • Figure 33: Type of mortgage held, by age, December 2015
                                                                                                      • Timing of Last Mortgage Purchase

                                                                                                        • Low interest rate deals have driven fixed-rate mortgage sales in the last year
                                                                                                          • Figure 34: When mortgage was arranged by type of mortgage held, December 2015
                                                                                                          • Figure 35: Level of concern about potential interest rate rise in 2016, December 2015
                                                                                                      • Methods Used for Mortgage-related Activities

                                                                                                        • Online is the most popular research method for mortgage products
                                                                                                          • Figure 36: Methods used for/interested in for researching and arranging a mortgage product, December 2015
                                                                                                        • Mortgage holders more likely to go online for straight-forward administration
                                                                                                          • Figure 37: Methods used for/interested in for administrating a mortgage product, December 2015
                                                                                                        • Millennial mortgage holders are more interested in mobile management
                                                                                                          • Figure 38: Use/interest in using a smartphone for mortgage-related activities, by age, December 2015
                                                                                                      • Satisfaction with Current Mortgage Product and Provider

                                                                                                        • Few are confident that their mortgage is the best option for them
                                                                                                          • Figure 39: Satisfaction with current mortgage product and provider, December 2015
                                                                                                        • Millennials less likely to be satisfied with provider communications
                                                                                                          • Figure 40: Satisfaction with current mortgage product and provider, December 2015
                                                                                                        • Most are happy with only one aspect, showing satisfaction could be broader
                                                                                                          • Figure 41: Number of statements selected indicating satisfaction with current mortgage product and provider, December 2015
                                                                                                      • Interest in Features of a New Mortgage Product

                                                                                                        • Interest in overpayment indicates growing confidence
                                                                                                          • Figure 42: Interest in features of a new mortgage product, December 2015
                                                                                                        • Half of highest earners interested in overpaying
                                                                                                          • Figure 43: Interest in the ability to overpay on a new mortgage product, by gross annual household income, December 2015
                                                                                                      • Attitudes towards Property Ownership and Mortgages

                                                                                                        • 39% of renters don’t think they’ll ever be able to afford their own home…
                                                                                                          • But 28% say that renting is more suited to their lifestyle
                                                                                                            • Figure 44: Attitudes towards property ownership and mortgages, December 2015
                                                                                                          • More than half of 45-54s give up on homeownership
                                                                                                            • Figure 45: Attitudes towards property ownership and mortgages, by age, December 2015
                                                                                                        • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                            • Abbreviations
                                                                                                              • Consumer research methodology
                                                                                                              • Appendix – Market Size and Forecast

                                                                                                                  • Figure 46: Best and worst case forecast of gross mortgage lending, 2015-20
                                                                                                                • Forecast methodology

                                                                                                                Companies Covered

                                                                                                                To learn more about the companies covered in this report please contact us.

                                                                                                                Mortgages - UK - March 2016

                                                                                                                £1,995.00 (Excl.Tax)