Following a remarkably positive year for the mortgage market in 2013, the industry has stepped into the New Year in a confident mood. Lenders and brokers were pleased to see a change in fortunes last year after five years of grappling with a struggling market in the wake of the financial crisis. So, riding the wave of Help to Buy and awaiting the introduction of the Mortgage Market Review in April, there are plenty of positive predictions.
The MMR puts the role of brokers firmly in the spotlight as, come April, all in-branch mortgage sales will have to be advised. Non-advised sales will be banned under the MMR, with the exception of borrowers who want to make a small contract variation or take out a retention product. It means lenders will need to train their staff to CeMap level or put all their business through brokers. Consequently there is an expectation lenders will have to increasingly turn to brokers to drive business. Complete can see the coming year being far busier than 2013. The question is, how do we manage this business flow? A key point will be how lenders choose to help the broker community with this change. W are also keen to see how lenders will treat procuration fees. There are sensible arguments to be made for increasing proc fees. But as house prices rise, and the percentage based proc fee represents a greater amount, lenders may decide the best course of action is to shave our proc fees instead. We believe mortgage rates may increase following the Bank of England's decision to scrap the Funding for Lending scheme for mortgages with effect from the end of this month.
With FLS funding being brought to a close, we feel it will mean an increase in the cost of securing funds for banks and other lenders. It is likely rates could rise slightly in light of the FLS scheme concentrating on business lending and being diverted away from mortgages. But there is still the need for lenders to remain competitive as the market gains pace, so we would not expect any rises in rates to be too steep. The successful introduction of both phases of Help to Buy has paved the way for more lenders to enter the high loan-to-value market.
We expect to see more lenders starting to offer 5 per cent deposit mortgage deals this year, given the clear appetite for such products made evident by Help to Buy. Association of Mortgage Intermediaries chief executive Robert Sinclair expects advisers to start seeing much higher business levels. He says: "Brokers face a busy 2014-with a recovering economy, we expect stronger demand for mortgages, particularly for brokers in the South, where the market is really resurging at a great pace - they will have to be slick in their processing or start recruiting admin support again.
Complete FS, is also expecting a buoyant mortgage market this year. Coming out of a very positive 2013, the intermediary lending sector can only go from strength to strength, barring unforeseen economic shocks. Lenders are becoming more confident and there are likely to be plenty of newcomers in all areas of the market, from bridging, secured loans, commercial and residential first charge. We will see lenders build on the gains of 2013, with the building society sector in particular continuing to be at the forefront of providing a customer-centric lending service which takes into account individual circumstances when making lending decisions.
The only potential negative this year could come from another unforeseen shock to the international economy. However, on balance, we think all the signs are there that we shall have another year of positive growth. We are also expecting a move to more consumer-focused underwriting. 2014 will be the year that specialist lending makes an even bigger impact on the lending market. What has been conclusively demonstrated is the rise of lenders across all sectors prepared to 'see' the client behind the application. "As conventional lenders continue to rely almost exclusively on credit scoring and sophisticated computer modelling, the new breed of lender along with many building societies have shown that underwriting which aims to engage the customer is meeting the needs of a new generation of borrowers.
Lenders and distributors will need to engage with the broker community even more closely this year as the implications and fallout from the MMR are felt. Most of our introducers are up to speed but we can all do more to ensure every intermediary is ready. For those that are, 2014 will be a very good year. Brokers are now in the best position to provide the service that only a whole of market view can provide. I am sure there will be a few hiccups as MMR is implemented but I cannot remember a time in the last seven years that we have welcomed a New Year in such a confident mood.