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MORTGAGES-UK-MARCH 2018

Published By :

Mintel

Published Date : Mar 2018

Category :

Banking

No. of Pages : N/A

The mortgage market remains in a good state, but it is probable that the slower rate of growth achieved in 2017 is likely to be a sign of things to come over the next few years. While mortgages are still in high demand, the challenges of Brexit uncertainty, squeezed household incomes and concerns over interest rate rises will limit performance.

Table of Contents

OVERVIEW
What you need to know
Products covered in this Report
EXECUTIVE SUMMARY
The market
Gross lending grew by 4% in 2017
Figure 1: Forecast of gross mortgage lending, 2012-22
Intermediaries distribute two thirds of new mortgages
Figure 2: Distribution of regulated mortgage sales, direct versus intermediated, 2012/13-2016/17
Price growth was subdued in 2017, but rates remain appealing
Figure 3: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for 2-year and 5-year fixed-rate mortgages at 75% LTV, 2-year variable-rate mortgage at 75% and standard variable-rate (SVR) mortgage, January 2012-January 2018
First-time buyers given stamp duty relief
Companies and brands
Lloyds is the UK’s largest mortgage lender
Figure 4: Top 10 UK mortgage providers, by outstanding mortgage balances at year-end, 2017
Adspend fell by a fifth in 2017
Figure 5: Total above-the-line, online display and direct mail advertising expenditure on mortgages, excluding equity release, 2013-17
Banks dogged by negative traits, while Post Office and Nationwide flourish
Figure 6: Attitudes towards and usage of selected brands, November 2017
The consumer
A quarter of consumers have a mortgage
Figure 7: Current housing situation, December 2017
More than half of borrowers have a fixed-rate loan
Figure 8: Type of mortgage held, December 2017
A quarter of mortgages were arranged in the last year
Figure 9: Timing of last mortgage, December 2017
Consumers are optimistic about home buying plans
Figure 10: Home buying plans for the next two years, by current housing situation, December 2017
Interest rates dominate consumers’ choice of lender
Figure 11: Factors affecting choice of mortgage lender, December 2017
Shopping around is generally limited to renewal periods
Figure 12: Mortgage shopping around activity, December 2017
Offers from current lenders are welcome, less so from elsewhere
Figure 13: Attitudes towards mortgage switching, December 2017
What we think
ISSUES AND INSIGHTS
Rising interest rates will bring opportunities and threats
The facts
The implications
Switching is held back by cost and a lack of understanding
The facts
The implications
At least a fifth of SVR customers would prefer an alternative product
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Gross lending grew by 4% in 2017
Buy-to-let hit hard but remortgages and FTBs continue to grow
Intermediaries distribute two thirds of new mortgages
Price growth was subdued in 2017, but rates remain appealing
First-time buyers given stamp duty relief
MARKET SIZE AND FORECAST
Gross lending grew by 4% in 2017
Figure 14: Gross mortgage lending, not seasonally adjusted, 2013-17
Lending forecast to enjoy steady growth in the next five years
Figure 15: Forecast of gross mortgage lending, 2012-22
Figure 16: Forecast of gross mortgage lending, at current and constant prices, 2012-22
Forecast methodology
MARKET SEGMENTATION
Buy-to-let activity hit hard by regulation changes
Figure 17: Volume of new mortgages, by purpose, not seasonally adjusted, 2013-17
Remortgaging and first-time buyers lead the growth in market value
Figure 18: Value of new mortgages, by purpose, not seasonally adjusted, 2013-17
CHANNELS TO MARKET
Intermediaries distribute two thirds of new mortgages
Figure 19: Distribution of regulated mortgage sales, direct versus intermediated, 2012/13-2016/17
Figure 20: Distribution of regulated mortgage sales, advised versus non-advised, 2012/13-2016/17
Borrowers most likely to say their bank was the main source of advice
Figure 21: Sources of mortgage advice used for last mortgage/remortgage, December 2017
MARKET DRIVERS
Price growth was subdued in 2017
Figure 22: Annual change in average UK house prices – ONS and Nationwide house price indices, January 2010-December 2017
Rates are still borrower-friendly…
Figure 23: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for 2-year and 5-year fixed-rate mortgages at 75% LTV, 2-year variable-rate mortgage at 75% and standard variable-rate (SVR) mortgage, January 2012-January 2018
…but high-LTV borrowers have seen fewer benefits
Figure 24: Monthly interest rate of UK monetary financial institutions (excluding Central Bank) for 2-year and 5-year fixed-rate mortgages at 95% LTV, January 2014-January 2018
Building has increased but more homes still needed
Figure 25: Number of permanent dwellings started and completed, 2006/07-2016/17
REGULATORY AND LEGISLATIVE CHANGES
First-time buyers given stamp duty relief
FCA’s mortgage market study delayed
Lifetime ISA launches to a cool welcome
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Lloyds is the UK’s largest mortgage lender
Lenders continue to compete on rates and improve processes
Adspend fell by a fifth in 2017
Banks dogged by negative traits, while Post Office and Nationwide flourish
MARKET SHARE
Lloyds is the UK’s largest mortgage lender
Figure 26: Top 10 UK mortgage providers, by outstanding mortgage balances at year-end, 2015-17
Big six dominate the market
TSB continues to impress
COMPETITIVE STRATEGIES
Lenders continue to compete on rates
Supermarket brands (re)enter the market
Brands seek to improve the application process
ADVERTISING AND MARKETING ACTIVITY
Above-the-line adspend fell again in 2017
Figure 27: Total above-the-line, online display and direct mail advertising expenditure on mortgages, excluding equity release, 2013-17
TV is the increasingly dominant channel for advertising mortgages
Figure 28: Total above-the-line, online display and direct mail advertising expenditure on mortgages, excluding equity release, by media type, 2015-17
Halifax is the biggest advertiser of mortgages in the UK
Figure 29: Top 10 advertisers of above-the-line, online display and direct mail advertising expenditure on mortgages, excluding equity release, 2015-17
Sponsorships help keep brand awareness high
Nielsen Ad Intel coverage
BRAND RESEARCH
Brand map
Wider business sees Post Office score high for trust and differentiation
Figure 30: Attitudes towards and usage of selected brands, November 2017
Key brand metrics
Nationwide is the most likely to provide an excellent experience
Figure 31: Key metrics for selected brands, November 2017
Brand attitudes: Supermarket brands’ customer service is perceived to be poor
Figure 32: Attitudes, by brand, November 2017
Brand personality: Post Office, Nationwide and Santander are the most fun
Figure 33: Brand personality – Macro image, November 2017
Sainsbury’s Bank and Post Office are seen as the most affordable
Figure 34: Brand personality – Micro image, November 2017
Brand analysis
Major banks still carry behavioural baggage…
…while challengers long for opportunities to prove trustworthiness
Post Office tops the chart in most positive attributes
Nationwide’s success is built on being different
THE CONSUMER – WHAT YOU NEED TO KNOW
A quarter of consumers have a mortgage
More than half of borrowers have a fixed-rate loan
A quarter of mortgages were arranged in the last year
Consumers are optimistic about home buying plans…
…and driven in the pursuit of low rates
Shopping around is generally limited to renewal periods
Offers from current lenders are welcome, less so from elsewhere
MORTGAGE OWNERSHIP
A quarter of consumers have a mortgage
Figure 35: Current housing situation, December 2017
35-54s are most likely to be paying a mortgage
Figure 36: Current housing situation, by age, December 2017
Lower earners exposed to later-life rental payments
Figure 37: Current housing situation, by gross annual household income, December 2017
TYPE OF MORTGAGE HELD
More than half of borrowers have a fixed-rate loan
Figure 38: Type of mortgage held, December 2017
SVRs remain the second most common type of mortgage
Figure 39: Type of mortgage held, by age, December 2017
TIMING OF LAST MORTGAGE PURCHASE
A quarter of outstanding mortgages were arranged in the last year
Figure 40: Timing of last mortgage, December 2017
Half of over-45s have had the same mortgage for more than five years
Figure 41: Timing of last mortgage, by age, December 2017
Four fifths of mortgages arranged in the last year have fixed rates
Figure 42: Type of mortgage held, by timing of last mortgage, December 2017
HOME BUYING PLANS
Consumers are optimistic about home buying plans
Figure 43: Home buying plans for the next two years, by current housing situation, December 2017
Private renters are by far the most likely to become first-time buyers
Figure 44: Home buying plans for the next two years, by current housing situation, not including full-time students or retirees, December 2017
FACTORS AFFECTING CHOICE OF MORTGAGE LENDER
Interest rates are the key factor in mortgage choice
Figure 45: Factors affecting choice of mortgage lender, by home buying plans, December 2017
Consumers appear to give little thought to worst-case scenarios
Reputation counts, but it’s not all about the brand
MORTGAGE COMPARISON AND SWITCHING
Most shop around when their loan term ends
Figure 46: Mortgage shopping around activity, December 2017
Proactive engagement is less common…
Figure 47: Agreement with selected statements about shopping around for mortgages, by type of mortgage held, December 2017
…largely due to costly exit fees
Figure 48: Agreement with selected statements about shopping around for mortgages, by timing of last mortgage purchase, December 2017
ATTITUDES TOWARDS MORTGAGE SWITCHING
Borrowers are happy to hear from existing providers...
Figure 49: Attitudes towards mortgage switching, December 2017
…but competitors are less welcome
Shopping around is hard work and difficult to understand
A significant proportion of SVR mortgage holders need help
Figure 50: Attitudes towards mortgage switching, by type of mortgage held, December 2017
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Figure 51: Best- and worst-case forecast of gross mortgage lending, 2017-22
Forecast methodology

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