Mortgages - UK - March 2009

Table of Contents

• Issues in the Market
• Key issues
• Abbreviations
• Market in Brief
• The outlook remains bleak...
• ... as consumer confidence falls and unemployment rises
• Competition from the rental market
• Gross mortgage lending fell by almost a third in 2008
  • Figure 1: Total mortgage lending, gross and net advances, 2000-08
• Fixed rate mortgages are the most popular choice
  • Figure 2: Mortgage ownership, by product type, 2004-08
• HBOS is the market leader
  • Figure 3: Market share of top 20 mortgage providers, by gross advances, 2007
• Intermediaries have been hard hit by the downturn
  • Figure 4: Distribution of gross advances, by channel type, 2007
• A third of people have a mortgage outstanding on their home...
  • Figure 5: Property ownership, January 2009
• ... and most still think property is a good long-term investment
• Internal Market Environment
• Key points
• The number of housing transactions has fallen
  • Figure 6: Number of UK property transactions with a value of £40,000 upwards (seasonally adjusted), Q2 2005-Q3 2008
• Repossessions have increased...
• ... encouraging the government to step in
• Liquidity remains a major constraint
  • Figure 7: Rolling 3-month average LIBOR vs BoE base rate, Jan 2003-Jan 2009
• Rescue package number two on the horizon
  • Figure 8: UK rescue package*, February 2009
• A new era of tighter regulation in the future?
• The end of 100%+ mortgages?
  • Figure 9: Residential loans to individuals*, by LTV ratio, Q3 2007 vs Q3 2008
  • Figure 10: Number of mortgage products available, February 2008 vs March 2009
• Broader Market Environment
• Key points
• House prices continue to decline...
  • Figure 11: Average house prices, Jan 2007-Jan 2009 (monthly data, seasonally adjusted)
• ...though some are optimistic about signs of recovery
• Consumer confidence has fallen sharply...
  • Figure 12: UK Consumer confidence, major indices, May 2004-January 2009*
• ...as more households struggle to make ends meet
  • Figure 13: Households' current financial position, Q4 2007-Q4 2008
• Demand for mortgages remains subdued
  • Figure 14: Expected mortgage and property purchase activity, Q3/Q4 2002-Q4 2008/Q1 2009
• Base rate drops to an all-time low...but also offers opportunities
  • Figure 15: Bank of England base rate, January 2000-February 2009
• Unemployment looks set to increase further in 2009
• Housing transactions fall sharply
• Competitive Context
• Key points
• Changing aspirations of home ownership?
• Owner-occupancy has remained static since 2000
  • Figure 16: Number of households in England and Wales, by tenure, 1981-2007
• Sale and rent back potentially impacts the market
• Strengths and Weaknesses in the Market
• Market strengths
• Evidence of rising pent-up demand
• Houses becoming more affordable for FTBs
• Stamp duty threshold has been increased
• An emphasis on direct sales reduces costs for lenders
• Market weaknesses
• Falling house prices deter potential buyers
• Liquidity continues to be a problem
• Arrears, repossessions and bad debts are rising
• Tighter lending criteria restrict loan availability
• Market Size and Forecast
• Key points
• Number of mortgage accounts declines slightly in 2008
  • Figure 17: Total number of mortgage accounts, 1997-2008
• Total mortgage debt stands at over £1.2 trillion
  • Figure 18: Total mortgage debt (amounts outstanding at year end), 2000-08
• Net lending down by two thirds in 2008
  • Figure 19: Total mortgage lending, gross and net advances, 2000-08
• New loans for house purchase have been particularly hard hit
  • Figure 20: Number of mortgage approvals, by type of mortgage, Jan 2006-Dec 2008 (monthly data, seasonally adjusted)
• Remortgages now account for over half of gross advances
• Home-movers account for three fifths of house purchase loans
  • Figure 21: Loans advanced for house purchase, by type of borrower, 2002-08
• Buy-to-let growth has slowed
  • Figure 22: Number and value of buy-to-let mortgages outstanding, 2000-08
• Market forecast
• A slow recovery expected from 2010
  • Figure 23: Forecast of total gross advances (at current prices), 2003-13
• The remortgage market may hold up better in 2009
  • Figure 24: Forecast of gross advances, by type of loan (at current prices), 2003-13
• Factors used in the forecast
• Market Segmentation
• Key points
• Fixed rate mortgages are the product of choice for most...
  • Figure 25: Mortgage ownership, by product type, 2004-08
• ...although trackers have become more popular recently
• Changing landscape affects margins
• Market Share
• Key points
• Banks benefit from specialist lenders pulling out of the market
  • Figure 26: Gross advances, by type of lender, Jan 2007-Dec 2008 (monthly data, seasonally adjusted)
• Abbey performed well in 2008...
  • Figure 27: UK gross and net mortgage lending of key providers, 2008
• ...as did Barclays, outperforming its competitors on net lending
• The disappearance of Northern Rock
  • Figure 28: Secondary lenders results and balances, 2008
• HBOS led the market in 2007
  • Figure 29: Market share of top 20 mortgage providers, by gross advances, 2007
• Winners and losers -- predictions for 2009
• Companies and Products
• Key points
• Navigating the mortgage maze
• Consolidation and contraction within the market
• Scaling back lending and cherry-picking customers
• Company snapshots
• HBOS
• Abbey
• Lloyds TSB (Lloyds Banking Group)
• Nationwide
• Other developments in the market
• Brand Communication and Promotion
• Key points
• Mortgages adspend has gradually decreased since 2005...
  • Figure 41: Top ten categories of financial services adspend, 2005-08
• ...and fell significantly in 2008
  • Figure 42: Top ten sub-categories of mortgages adspend, 2005-08
• Northern Rock' s mortgage adspend falls to zero in 2008
  • Figure 43: Top 20 advertisers of mortgages, by adspend, 2005-08
• A more balanced advertising strategy has emerged
  • Figure 44: Total mortgages adspend, by media type, 2008
• Channels to Market
• Key points
• Current account providers have a big advantage
  • Figure 45: Sources of information and advice used for arranging a mortgage, January 2009
• TGI data show direct arrangement is most popular
  • Figure 46: Mortgage ownership, by method of arrangement, 2002-08
• Intermediaries dominated the market in 2007
  • Figure 47: Distribution of gross advances, by channel type, 2007
• The Consumer -- Ownership and Expectations
• Key points
• Where now for first-time buyers?
  • Figure 48: Property ownership, January 2009
• The buy-to-let generation re-thinks their options
• Plenty of younger people on the ladder -- and plenty wanting to join them
  • Figure 49: Property ownership, by age, January 2009
• Selling to the better-off
  • Figure 50: Property ownership, by socio-economic group, January 2009
• Clearing debts before retirement
  • Figure 51: Property ownership, by lifestage, January 2009
• The boom is well and truly over
  • Figure 52: Expected growth in house prices, January 2009
• Irrational exuberance turns to rational pessimism
• A new approach to dinner party conversations
  • Figure 53: Expected growth in house prices, by socio-economic group, January 2009
• High income, more worries
  • Figure 54: Expected growth in house prices, by household income, January 2009
• Not much optimism among younger people
  • Figure 55: Expected growth in house prices, by age, January 2009
• Homeowners no more optimistic than the general public
  • Figure 56: Expected growth in house prices, by property ownership, January 2009
• The Consumer -- Attitudes and Advice
• Key points
• The love affair isn' t dead yet
  • Figure 57: Attitudes towards buying property and the housing market, January 2009
• PR problems ahead?
• Collateral damage for lenders?
  • Figure 58: Attitudes towards buying property and the housing market, by gender and age, January 2009
• Key customers the most suspicious
  • Figure 59: Attitudes towards buying property and the housing market, by socio-economic group and lifestage, January 2009
• Potential buyers shut out of the market
  • Figure 60: Attitudes towards buying property and the housing market, by property ownership, January 2009
• Disintermediation isn' t just for lenders
  • Figure 61: Sources of information and advice used for arranging a mortgage, January 2009
• Mortgage-holders particularly reliant on the banks
  • Figure 62: Sources of information and advice used for arranging a mortgage, by property ownership, January 2009
• Building word of mouth for future customers
  • Figure 63: Sources of information and advice used for arranging a mortgage, by age, January 2009
• A broad base of opinion
  • Figure 64: Sources of information and advice used for arranging a mortgage, by socio-economic group, January 2009
• Appendix
• Property ownership and mortgage holdings
  • Figure 74: Property ownership, by demographic group, January 2009
• Price expectations
  • Figure 75: Property price expectations, by demographic group, January 2009
• Attitudes towards buying property
  • Figure 76: Attitudes towards buying property and the housing market, by gender and age, January 2009
  • Figure 77: Attitudes towards buying property and the housing market, by socio-economic group and lifestage, January 2009
  • Figure 78: Attitudes towards buying property and the housing market, by marital status and special group, January 2009
  • Figure 79: Attitudes towards buying property and the housing market, by working status and household income, January 2009
  • Figure 80: Attitudes towards buying property and the housing market, by region, January 2009
  • Figure 81: Attitudes towards buying property and the housing market, by newspaper readership and internet usage, January 2009
• Mortgage switching behaviour
  • Figure 82: Mortgage switching behaviour, by demographic group, January 2009
• Sources of advice
  • Figure 83: Key sources of information and advice used for arranging a mortgage, January 2009
• Attitudinal groups
  • Figure 84: Demographic characteristics of attitudinal groups, January 2009