Protection Viewpoint 2024: Making Protection Personal – what can we expect?

With only two weeks to go until the launch of this year’s AMI Protection Viewpoint, we share some of the insights gained from this year’s surveys…

AMI’s Protection Viewpoint 2024 – only 4 weeks to go!

It’s only 4 weeks until the launch of the 5th Protection Viewpoint – Making Protection Personal – on 5th November. Register now for virtal live launch event…

Registration is now open for the Later Life Lending Summit

Registrations are open for the Later Life Lending Summit, which takes place on 19th November in Sheffield – brought to you by AMI and the Equity Release Council…

AMI’s Protection Viewpoint 2024 Live Launch – register now!

With just over a month to go until the live launch of this year’s Protection Viewpoint, we would like to say a big thank you – register for your place now…

Your September ’24 update from AMI Chief Executive Robert Sinclair

AMI Chief Executive Robert Sinclair gives his September update, including the housing market, the lender-broker relationship, the green agenda and more…

September 2024 Latest FOS complaints – AMI comments

Latest FOS complaints that may be of interest to mortgage intermediary firms, including AMI’s comments…

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Robert Sinclair – what next for housing and mortgages?

 AMI Chief Executive Robert Sinclair discusses the future for housing and mortgages, in his latest article for IRESS Magazine.

As we move towards 2025, the UK mortgage landscape is likely to be characterised by shifts influenced by political, economic, regulatory, and technological changes. The UK housing market remains a cornerstone of the economy, with mortgages a critical component enabling property ownership of a variety of different tenures. It remains surprising that such a crucial bedrock is left to a series of unconnected influencers to manage.

Political

The arrival of a Labour government has seen a new legislative agenda bristling with promise of changes in planning, clear housing targets and funding support. In the coming months we will see an Autumn statement that will fill in some of the gaps together with the Ministry of Housing, Communities and Local Government sure to jump to the centre stage as they colour in the plans they have for the future.

There is speculation that we could see a return of:

  • A form of Help to Buy;
  • The establishment of a New Town on the HS2 railway line;
  • Significant revisions to planning laws and the green belt with the slaughter of NIMBY’s;
  • Pressure on developers to build more social housing and affordable homes;
  • Local authorities being encouraged to get back into the building game.

We will also see more rent reform that is bound to influence investment decisions in the private rented sector. Whilst a ban on no fault evictions seems inevitable, a rent growth cap of say 3% might be better than a total freeze on rents.

Economy

The UK economy has returned to relative stability following the disruptions caused by Brexit, the COVID-19 pandemic, the Ukraine crisis and the now not to be criticised mini-Budget. Economic stagnation has somehow delivered stable employment rates, rising wages and reasonable degrees of consumer confidence. On average, UK house prices have continued to rise over these stress periods despite there being some regional variations. However, inflation has been a significant challenge, influencing the Bank of England’s interest and monetary policy and consequently mortgage interest rates.

With Bank of England Base Rate now falling, it is unlikely to fall below 3% at any point in the foreseeable future, so interest rates are going to remain relatively higher than the historic lows experienced through the 2010s and the early 2020s. We will all have to get used to this. More expensive mortgages have impacted the affordability of home loans. In keeping with this, recommendations have been mixed between tracker rates for those who want to have flexibility and defer decisions, and those who prefer the stability of fixed rate mortgages that are determined by the Sonia and SWAPS markets. These already have two more base rate reduction this year priced in and therefore the downward drift in fixed rates will be slower than many commentators might expect.

With higher interest rates and no fall in house prices, borrowers have needed to look at longer terms for their loans, with some looking at 40 year mortgages to clear the affordability hurdle. These borrowers will need advice throughout the term of their loan to ensure it is repaid before they reach the end of their working lives.

Regulatory Environment

The regulatory framework continues to evolve to address the challenges and risks in the housing market. The more rigorous affordability assessments brought in during 2014 ensured borrowers managed repayments even in these higher interest rates environments. The stress testing against higher rates has provided a great buffer.

The introduction by the FCA of new principles encapsulated within “Consumer Duty” raises the bar. This increases the emphasis in products delivering fair value – that they should meet the customer’s wider financial objectives and ensuring they understand what they have bought, and why the product is relevant to them. Linked to this, we are seeing increased emphasis on discussions to ensure that the mortgage is still repayable even if life events get in the way. Life cover, critical illness protection and income protection policies are all at the forefront of discussions to ensure that, in the event of bad events, people still have a home to live in.

The private rented sector remains a key source of flexible housing for many who struggle to save a deposit or meet the tight affordability tests on mortgages. However, local authority licensing, new building and fire safety controls combined with major changes to tax treatment have combined to challenge this sector. The PRS is a vital component of the tenures available, and government need to ensure it is protected to keep a flexible workforce able to move to where they are required.

Related Issues

The push for sustainable housing is both a challenge and an opportunity. Lenders offering green mortgages can capitalise on this trend, while borrowers benefit from energy-efficient homes and potential cost savings. However, we currently only have two types of product. The first rewards those buying an energy efficient property – EPC A or B, where they get a lower interest rate or can borrow more due to the perceived lower running costs of the property. The second is the funding of retrofit activity to help enhance the overall UK housing portfolio. We will see significant development in the funding of green initiatives in the next two years. This will be driven as the new government provides clearer pathways on the green journey and works to create a consumer demand for action.

There is also likely to be action to address the issues facing certain coastal communities, where there has been an explosion in holiday homes, Airbnb and HMOs. This can price locals out of the property market and damage the local economy, as they cannot find people to work in local businesses.

Conclusion

The UK mortgage market remains a dynamic and evolving sector subject to multiple influences.  House prices are likely to remain stable as the growth in supply will still not match the increases in demand for at least two years.  The 1.5 million houses target is back-end loaded with 400,000 units likely to be needed in 2028.

Technology will work to improve the end to end buying and selling process, but the human touch in the advice process will remain a core offering.  The new government will ask more of the industry and it will be up to lenders and advisers to help deliver a better tomorrow.

© 2024 Association of Mortgage Intermediaries Limited.

AMI is the trading name of The Association of Mortgage Intermediaries Limited which is a company limited by guarantee, registered in England and Wales under the Companies Acts with number 7982341. Our registered address is Celixir House, Stratford Business & Technology Park, Innovation Way, Banbury Road, Stratford-upon-Avon, Warwickshire, CV37 7GZ.

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