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Mortgages - UK - March 2014

Published By :

Mintel

Published Date : Apr 2014

Category :

Banking

No. of Pages : 169 Pages

Current market conditions present an opportunity for lenders to start promoting long-term fixed rate mortgages among UK consumers. As interest rates will only increase in the future, there has never been a better time to get people thinking about the advantages of longer-term mortgage products.
Table of Content

Introduction

Market definitions
Abbreviations

Executive Summary

The market
Gross mortgage advances increased in 2013 and will continue to grow
Figure 1: Forecast of gross mortgage lending, 2008-18
First-time buyers driving growth of house purchase loans
Figure 2: Loans advanced for house purchase, by type of borrower, 2006-13
Market factors
MMR comes into force in April 2014
Help to Buy proving beneficial for first-time buyers
Funding for Lending Scheme scaled back from February 2014
BoE base rate remains at historical low but will go up in the near future
Repossessions and arrears down in 2013
House prices showing strong growth
Companies, brands and innovation
Lloyds Banking Group leads the way in gross mortgage advances
Figure 3: Top six mortgage lenders, by gross advances, 2013
Nationwide leads the way on trust
Figure 4: Attitudes towards and usage of brands operating in the mortgages sector, December 2013
The consumer
Mortgage ownership
Figure 5: Mortgage ownership, December 2013
Type of mortgage held
Figure 6: Type of mortgage held, December 2013
Consumer mortgaging and re-mortgaging intentions
Figure 7: Mortgaging and re-mortgaging intentions over the next 12 months, December 2013
Consumer preferences for arranging mortgages
Figure 8: Preferred methods of mortgage arrangement, December 2013
Attitudes towards Help to Buy
Figure 9: Attitudes towards the Help to Buy scheme, December 2013
Consumer attitudes towards house prices
Figure 10: Consumer attitudes towards house prices, December 2013
Consumer attitudes towards fixed-rate mortgages
Figure 11: Consumer attitudes towards fixed-rate mortgages, December 2013
Consumer attitudes towards mortgage repayments
Figure 12: Consumer attitudes towards mortgage repayments, December 2013
What we think

Issues and Insights

Capitalising on low interest rates to promote long-term fixed products
The facts
The implications
Customer confusion and dealing with interest-only mortgage clients
The facts
The implications
The MMR and consumer preferences will drive a change in distribution strategies
The facts
The implications

Trend Application

Taking a smaller hit today
Skype with your mortgage lender
Mintel futures: Generation Next

Market Drivers

Key points
MMR comes into effect in April 2014
Help to Buy proving a success so far
Funding for Lending Scheme scaled back from February 2014
FCA finalises guidance on lender responsibilities for treating interest-only customers fairly
BoE base rate remains at historical low but will go up in the near future
Figure 13: Bank of England base rate, three-month (monthly average) LIBOR and effective new mortgage rate, January 2007-December 2013
Housing transactions up by 15% in 2013
Figure 14: Number of UK residential property transactions with a value of £40,000 upwards – seasonally adjusted, Q1 2007-Q4 2013
Homebuilding levels remain well below their peak
Economic developments and consumer sentiment
Mortgage approvals show consecutive quarterly growth in 2013
Figure 15: Number of quarterly mortgage approvals (seasonally adjusted), by type, Q1 2007-Q4 2013
Repossessions and arrears down in 2013
Average house prices show strong growth in 2013
Figure 16: Annual change in average UK house price – comparison of four sources, Q1 2007-Q4 2013

SWOT Analysis

Figure 17: UK mortgage market, SWOT analysis, 2014

Who’s Innovating?

Key points
Halifax offers to pay 1% stamp duty for first-time buyers
Leeds Building Society offers clients the chance to defer first six months interest payments
Help to Buy leads to increased competition in the 95% LTV market
The Bank of Mum and Dad

Market Size and Forecast

Key points
Gross mortgage lending up by 21% in 2013
Figure 18: Total secured lending, by gross and net advances (not seasonally adjusted), 2007-13
Market forecast
Gross mortgage lending expected to increase over the next 5 years
Figure 19: Forecast of gross mortgage lending, 2008-18
Figure 20: Forecast of gross mortgage lending, at current and constant prices, 2008-18
Forecast methodology
Fan chart explanation

Segment Performance

Key points
Banks account for the lion’s share of mortgage lending
Figure 21: Gross mortgage lending, by type of lender (not seasonally adjusted), 2007-13
All types of mortgage advances increased in 2013
Figure 22: Gross mortgage lending, by type of loan, 2006-13
First-time buyers driving growth of house purchase loans
Figure 23: Loans advanced for house purchase, by type of borrower, 2006-13

Market Share

Key points
Lloyds Banking Group leads the way in gross mortgage lending
Figure 24: Top six mortgage lenders, by gross advances, 2011-13

Companies and Products

Barclays
Figure 25: Key annual financial data for Barclays PLC, 2012 and 2013
HSBC
Figure 26: Key annual financial data for HSBC Bank PLC, 2012 and 2013
Lloyds Banking Group
Figure 27: Key annual financial data for Lloyds Banking Group, 2012 and 2013
Nationwide
Figure 28: Key annual financial data for Nationwide Building Society, 2011/12 and 2012/2013
RBS/NatWest
Figure 29: Key annual financial data for RBS Group, 2012 and 2013
Santander
Figure 30: Key annual financial data for Santander UK, 2012 and 2013

Brand Communication and Promotion

Key points
Mortgage advertising almost doubled in 2012/13
Figure 31: Total advertising expenditure on mortgage products and services, 2008/09-2012/13
Two thirds of advertising expenditure are focused on brand building
Figure 32: Advertising expenditure on mortgage products and services, by sub-category, 2008/09-2012/13
Top five advertisers account for 70% of advertising expenditure
Figure 33: Advertising expenditure on mortgage products and services (excluding equity release), by top 15 advertisers, 2012/11-2012/13
Television and press advertising most widely used channels
Figure 34: Proportional distribution or mortgage adspend (excluding equity release), by media type, 2010/11-2012/13
A note about adspend

Brand Research

Brand map
Figure 35: Attitudes towards and usage of brands operating in the mortgages sector, December 2013
Correspondence analysis
Brand attitudes
Figure 36: Attitudes, by brands operating in the mortgages sector, December 2013
Brand personality
Figure 37: Personality of brands operating in the mortgages sector – macro image, December 2013
Figure 38: Personality of brands operating in the mortgages sector – micro image, December 2013
Brand experience
Figure 39: Usage of brands operating in the mortgages sector, December 2013
Figure 40: Satisfaction with various brands operating in the mortgages sector, December 2013
Figure 41: Consideration of brands operating in the mortgages sector, December 2013
Figure 42: Consumer perceptions of current performance of brands operating in the mortgages sector, December 2013
Brand recommendation
Figure 43: Recommendation of brands operating in the mortgages sector, December 2013
Target group analysis
Figure 44: Target groups, December 2013
Figure 45: Mortgages brand usage, by target groups, December 2013
Group One – Conformists
Group Two – Simply the Best
Group Three – Shelf Stalkers
Group Four – Habitual Shoppers
Group Five – Individualists

Channels to Market

Key points
Sales split evenly between intermediated and direct channels
Figure 46: Proportional distribution of regulated mortgage sales, by channel, 2008/09-2012/13
Around three quarters of mortgages are sold on an advised basis
Figure 47: Distribution of regulated mortgage sales, advised versus non-advised, 2008/09-2012/13

Mortgage Ownership

Key points
Some 35% of UK adults have a mortgage on their home
Figure 48: Mortgage ownership, December 2013
Bell-shaped distribution of mortgage ownership when it comes to age
Figure 49: Mortgage ownership, by age, December 2013
Household income is influential in mortgage ownership
Figure 50: Mortgage ownership, by gross annual household income, December 2013
Married couples and those with children more likely to have a mortgage
Figure 51: Mortgage ownership, by gross annual household income, December 2013

Type of Mortgage Held

Key points
Around two fifths have a variable rate or tracker mortgage
Figure 52: Type of mortgage held, December 2013
Consumer confusion about interest-only mortgages
Confusion is more pronounced among younger adults
Figure 53: Ownership of interest-only and variable/tracker mortgages, by age, December 2013

Developments in the Interest-Only Mortgage Market

Key points
One in two adults saving to repay the capital on their interest-only mortgage
Figure 54: Consumers with interest-only mortgages and market developments, December 2013
Adults aged 18-34-years-old much more likely to be looking at switching to repayment products
People who had had contact from their lender are much more engaged
Figure 55: Consumers with interest-only mortgages and market developments, by consumers with interest-only mortgages and market developments, December 2013

Consumer Mortgaging and Re-Mortgaging Intentions

Key points
Around a fifth of adults are considering a mortgage/re-mortgage
Figure 56: Mortgaging and re-mortgaging intentions over the next 12 months, December 2013
Mortgaging intentions are highest among 25-34-year-olds
Figure 57: Mortgaging and re-mortgaging intentions over the next 12 months, by age, December 2013
Londoners are more likely to be active in the mortgage market over the next year
Figure 58: Mortgaging and re-mortgaging intentions over the next 12 months, by region, December 2013
Household financial situation drives mortgaging intentions
Figure 59: Mortgaging and re-mortgaging intentions over the next 12 months, by current financial situation compared to a year ago, December 2013

Consumer Preferences for Arranging Mortgages

Key points
Consumers still show preference towards face-to-face sales
Figure 60: Preferred methods of mortgage arrangement, December 2013
Almost a third would be comfortable with a fully digitalised process
Home movers most likely to want online process for mortgage applications
Figure 61: Preferred methods of mortgage arrangement, by mortgaging and re-mortgaging intentions over the next 12 months, December 2013
Face-to-face more appealing to those with variable rate/tracker products
Figure 62: Preferred methods of mortgage arrangement, by type of mortgage held, December 2013

Attitudes Towards Help to Buy

Key points
A fifth of adults would be interested in using the Help to Buy scheme
Figure 63: Attitudes towards the Help to Buy scheme, December 2013
Younger adults are more interested in the Help to Buy scheme
Figure 64: Agreement with the statement ‘I would be interested in making of this scheme in the future’, by age, December 2013
Adults with children aged 0-4-years-old could use Help to Buy to upscale
Help to Buy encourages optimism about future mortgaging activity
Figure 65: Mortgage and re-mortgaging intentions over the next 12 months, by attitudes towards the help-to-buy scheme, December 2013

Consumer Attitudes Towards House Prices

Key points
The majority of home owners feel that property is a good investment
Figure 66: Consumer attitudes towards house prices, December 2013
Interest-only mortgage holders more dependent on rising house prices
Figure 67: Consumer attitudes towards house prices, by interest only mortgage holders who agree with the statement ‘I am hoping that house prices will rise enough so that I can downsize and pay off my mortgage’, December 2013
Prospective first-time buyers less enthusiastic about increasing house prices
Figure 68: Consumer attitudes towards house prices, by first-time buyer mortgaging intentions, December 2013

Consumer Attitudes Towards Fixed-Rate Mortgages

Key points
Strong interest for long term fixed rate products
Figure 69: Consumer attitudes towards fixed-rate mortgages, December 2013
Lenders need to convince variable/tracker product holders to switch
Figure 70: Agreement with the statement ‘It is a good idea to switch to a fixed-rate mortgage now as rates will only go up’, by type of mortgage held, December 2013
First-time buyers are less interested in long-term fixed rate products
Figure 71: Agreement with the statements ‘I would be interested in mortgage products which have a fixed rate for 10+ years’, by mortgaging and re-mortgaging intentions, December 2013

Consumer Attitudes Towards Mortgage Repayments

Key points
Over two fifths do not think they would be able to get a new mortgage or re-mortgage
Figure 72: Consumer attitudes towards mortgage repayments, December 2013
Improvements in household finances drives overpayment intentions
Figure 73: Agreement with the statement ‘I am planning to make overpayments on my mortgage during the next 12 months’, by current financial situation compared to a year ago, December 2013
Two fifths of variable/tracker rate mortgage holders are concerned about rising interest rates
Figure 74: Agreement with the statement ‘I would struggle to meet my mortgage repayments if interest rates increased’, by type of mortgage held, December 2013

Appendix – Market Drivers

Figure 75: GFK NOP Consumer Confidence Barometer January 1989-February 2014
Figure 76: UK households, by size, 2008-18

Appendix – Market Size and Forecast

Figure 77: Best and worst case forecast of gross mortgage lending, 2013-18

Appendix – Brand Research

Figure 78: Brand usage, December 2013
Figure 79: Brand commitment, December 2013
Figure 80: Brand momentum, December 2013
Figure 81: Brand diversity, December 2013
Figure 82: Brand satisfaction, December 2013
Figure 83: Brand recommendation, December 2013
Figure 84: Brand attitude, December 2013
Figure 85: Brand image – macro image, December 2013
Figure 86: Brand image – micro image, December 2013
Figure 87: Profile of target groups, by demographics, December 2013
Figure 88: Psychographic segmentation, by target groups, December 2013
Figure 89: Brand usage, by target groups, December 2013

Appendix – Mortgage Ownership

Figure 90: Mortgage ownership, by demographics, December 2013

Appendix – Type of Mortgage Held

Figure 91: Nets of type of mortgage held, by demographics, December 2013
Figure 92: Type of mortgage held, by demographics, December 2013

Appendix – Developments in the Interest-Only Mortgage Market

Figure 93: Interest-only mortgage developments – I am hoping that house prices will rise enough so that i can downsize and pay off my mortgage, by demographics, December 2013
Figure 94: Interest-only mortgage developments – I am saving/investing so that i can repay the capital at the end of my mortgage term, by demographics, December 2013
Figure 95: Interest-only mortgage developments – My mortgage provider/lender has contacted me to discuss my plans and savings for repaying the capital, by demographics, December 2013
Figure 96: Interest-only mortgage developments – I am planning to downsize at the end of my mortgage term so i am not worried about being able to repay all of the capital on my home, by demographics, December 2013
Figure 97: Interest-only mortgage developments – I worry that i am not going to have enough savings to repay the outstanding capital at the end of my mortgage term, by demographics, December 2013
Figure 98: Interest-only mortgage developments – I am looking to switch to a repayment mortgage, by demographics, December 2013

Appendix – Consumer Mortgaging and Re-Mortgaging Intentions

Figure 99: Mortgaging and re-mortgaging intentions, by demographics, December 2013

Appendix – Consumer Preferences for Arranging Mortgages

Figure 100: Preferred methods of mortgage arrangement, by demographics, December 2013

Appendix – Attitudes Towards Help to Buy

Figure 101: Attitudes towards the help-to-buy scheme, by demographics, December 2013

Appendix – Consumer Attitudes Towards House Prices

Figure 102: Agreement with the statement ‘Buying property is a good long-term investment’, by demographics, December 2013
Figure 103: Agreement with the statement ‘An increase in house prices increases my confidence in the economy’, by demographics, December 2013
Figure 104: Agreement with the statement ‘An increase in house prices makes me feel more financially secure’, by demographics, December 2013

Appendix – Consumer Attitudes Towards Fixed-Rate Mortgages

Figure 105: Agreement with the statement ‘I would be interested in mortgage products which have a fixed rate for 10+ years’, by demographics, December 2013
Figure 106: Agreement with the statement ‘It is a good idea to switch to a fixed-rate mortgage now as rates will only go up’, by demographics, December 2013

Appendix – Consumer Attitudes Towards Mortgage Repayments

Figure 107: Agreement with the statement ‘I do not think that i would be able to get a new mortgage/re-mortgage at the moment’, by demographics, December 2013
Figure 108: Agreement with the statement ‘I would struggle to meet my mortgage repayments if interest rates increased^’, by demographics, December 2013
Figure 109: Agreement with the statement ‘I am planning to make overpayments on my mortgage during the next 12 months^’, by demographics, December 2013

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