Mortgages: Weathering the Credit Storm - UK - March 2008

Table of Contents

• Issues in the Market
• Key issues:
• Abbreviations
• Market in Brief
• Fall-out from the credit crunch continues to exert market pressure
• The overall level of mortgage lending has started to wane
• Trade perspective: Credit crunch provides the key market challenge
• Mintel' s research findings: Mortgage ownership
• Mintel' s research findings: Remortgage activity
• Mintel' s research findings: Targeting opportunities
• Broader Market Environment
• Key points
• Personal sector indebtedness has risen to record levels
  • Figure 1: Total household debt, 1993-2007
• Concerns are rising about households' ability to repay its debt
  • Figure 2: Mortgage debt to households' disposable income, 1977-2007
• But arrears and possessions remain at relatively low levels
  • Figure 3: Repossessions and arrears as a proportion of total mortgages, 1987-2007
• The future path of interest rates will be crucial
  • Figure 4: Bank of England base rate, end of quarter, 1972-2008
• The number of people in employment is at record levels
  • Figure 5: Summary of the UK labour market, 1995-2007
• A rise in the number of households will boost housing demand
  • Figure 6: Total number and average size of households in the UK, 1991-2012
• Internal Market Environment
• Key points
• The US sub-prime mortgage crisis has instigated a credit crunch
• Liquidity shortages continue to plague the mortgage market
• Property transactions remained at healthy levels in 2007
  • Figure 7: Property transactions in England and Wales, 1980-2007
• Although housing turnover has now started to wane
• The rate of house price growth has also started to fall
  • Figure 8: Annual house price inflation in the UK, 1995-2007
• House price inflation varies significantly on a regional basis
  • Figure 9: Mix-adjusted house prices by region, 2007
• Competitive Context
• Key points:
• The unsecured lending sector is one potential competitor
• The main competition stems from the rented housing sector
  • Figure 10: Proportion of households in England and Wales, by tenure, 1981-2007
• Strengths and Weaknesses in the Market
  • Figure 11: Strengths and weaknesses in the mortgage market
• Strengths
• Weaknesses
• Market Size and Forecast
• Key points
• There are 11.8 million mortgage accounts in the UK
  • Figure 12: Total number of mortgage accounts, 1997-2007
• Total mortgage debt has risen to almost £1.2 trillion
  • Figure 13: Total value of outstanding mortgage debt, 1997-2007
• Gross mortgage lending rose to record levels in 2007
  • Figure 14: Gross and net lending secured on dwellings, 1997-2007
• The overall level of mortgage lending has started to wane
• Other advances fuelled mortgage lending during 2007
  • Figure 15: Gross advances, by type of loan, 2002-07
• First time buyers account for just over a third of all loans
  • Figure 16: Loans for house purchase, by type of borrower, 2002-07
• Fixed rates accounted for almost three quarters of lending in 2007
  • Figure 17: Loans for house purchase and remortgages, by type of product, 2002-07
• But demand for tracker mortgages has now started to rise
• Forecast
• Fall in gross advances
  • Figure 18: Gross and net lending secured on dwellings, 2003-12
• Remortgages to take centre stage in 2008
  • Figure 19: Gross advances, by type of loan, 2002-07
• Factors incorporated
• Market Share
• Key points
• Banks account for more than half of all mortgage balances
  • Figure 20: Mortgage balances outstanding, by type of institution, 1997-2007
• Other specialist lenders have enjoyed spectacular growth rates
• HBOS accounts for a fifth of all mortgage balances
  • Figure 21: Top 30 mortgage lenders, ranked by total mortgage balances outstanding, 2006
• Five specialist lenders are in the top 20
  • Figure 22: Top 30 mortgage lenders, ranked by gross mortgage lending, 2006
• Companies and Products
• Key points
• Mortgage customers can choose from a diverse product range...
• ...but the range has seen a huge post-credit crunch contraction
• Falling loan-to-values
• Tracker products have recently become more popular
• Firms repositioning and changing strategy
• Company snapshots
• HBOS
• Abbey
• Lloyds TSB
• Nationwide Building Society
• Brand Communication and Promotion
• Key points
• The mortgage industry invests heavily in advertising
• Mortgage providers spent £81 million on advertising in 2007
  • Figure 23: Advertising expenditure on mortgage products, 2003-07
• The Press is the main advertising medium used by lenders
  • Figure 24: Advertising expenditure on mortgage products, by media type, 2006-07
• Norwich Union tops the mortgage adspend table
  • Figure 25: Advertising expenditure on mortgage products, by organisation, 2006-07
• Channels to Market
• Key points
• The mortgage distribution landscape has changed in recent years
• Many borrowers still prefer to arrange their loan in a branch
• Remote channels have complemented the distribution mix
• Intermediaries are also performing an increasingly important role
• The Consumer -- Mortgage Ownership
• Key points
• Survey background
• Around a third of all adults currently hold a mortgage
  • Figure 41: Property ownership, December 2007
• More than two-thirds of ABC1 35-54s own a mortgage
  • Figure 42: Property ownership, by gender, age, and socio-economic group, December 2007
• Mortgage demand is typically driven by life events
  • Figure 43: Property ownership, by detailed lifestage groups, December 2007
• Two thirds of high income households own a mortgage
  • Figure 44: Property ownership, by working status, income, ACORN group and TV region, December 2007
• Over half of all Waitrose customers hold a mortgage
  • Figure 45: Property ownership, by technology users, commercial TV viewing, newspaper readership and supermarket used, December 2007
• Three quarters of potential first time buyers are aged 18-34
  • Figure 46: Profile of mortgage holders and potential first time buyers, December 2007
• Repayment is by far the most common type of mortgage
  • Figure 47: Type of mortgage homeowners hold, December 2007
• A fifth of 45-54-year-old homeowners hold an endowment mortgage
  • Figure 48: Type of mortgage homeowners hold, by gender, age, and socio-economic group, December 2007
• Other types of mortgages appeal to the pre-/no family lifestage
  • Figure 49: Type of mortgage homeowners hold, by lifestage, working status, ACORN group and TV region, December 2007
• The Consumer -- Remortgage Activity
• Key points
• The vast majority of consumers are satisfied with their mortgage
  • Figure 50: ' Satisfied with current mortgage and mortgage provider' , December 2007
• A particularly high proportion of 45-54s are satisfied customers
  • Figure 51: ' Satisfied with current mortgage and mortgage provider' , by gender, age, socio-economic group and lifestage, December 2007
• One in seven London mortgage holders are dissatisfied
  • Figure 52: ' Satisfied with current mortgage and mortgage provider' , by income, TV region, technology users and newspaper readership, December 2007
• Almost half of all borrowers have switched their mortgage
  • Figure 53: ' Haven' t switched mortgage since I last moved house' , December 2007
• A majority of 45-54-year-olds no longer hold their original loan
  • Figure 54: ' Haven' t switched mortgage since I last moved house' , by gender, age, socio-economic group and lifestage, December 2007
• Almost six in ten borrowers in London hold their original loan
  • Figure 55: ' Haven' t switched mortgage since I last moved house' , by income, TV region, technology users and newspaper readership, December 2007
• Almost a quarter of all borrowers are inclined to remortgage
  • Figure 56: ' Thinking of changing mortgage/mortgage provider in next 12 months' , December 2007
• A third of the pre-/no family lifestage group intend to remortgage
  • Figure 57: ' Thinking of changing mortgage/mortgage provider in next 12 months' , by gender, age, socio-economic group and lifestage, December 2007
• More than three in ten London borrowers want to switch
  • Figure 58: ' Thinking of changing mortgage/mortgage provider in next 12 months' , by income, TV region, technology users and newspaper readership, December 2007