Mortgage Voice: Mapping the Mortgage Market; Meeting Market … · 2014-07-24 · Mortgage market...

Mortgage Voice: Mapping the Mortgage Market; Meeting Market Need Consumer Attitudes and Analysis April 2014

www.precisemortgages.co.uk

1. Methodology 2. Foreword 3. Market overview 4. A healthy market?

What help is available? 5. Eligibility and access 6. A nation of homeowners?

Why do consumers rent? 7. Rise of the rental market

Buy to let landlords - views 8. Conclusion

Contents

2 www.precisemortgages.co.uk

The aim of Mortgage Voice is to investigate consumer attitudes towards, and understanding of, the mortgage market. In particular, what are the major barriers to mortgage lending and how do consumers – aspiring homeowners and buy to let landlords – feel about the market and its direction of travel? While the market appears buoyant, are issues of access and eligibility continuing to exclude viable candidates and how have demographic changes fundamentally altered what providers need to do?

1. Methodology


Research was carried out by Watermelon Research (a Chime Plc company)

The fieldwork was carried out between 05/02/14 and 19/02/14 via an online survey. The sample was made up of 200 landlords and a representative sample of 2000 consumers (18 –

65+)

Alan Cleary – Managing Director, Precise Mortgages

“By rights, 2014 should be a year to remember for the UK housing market: evidence indicates Help to Buy has succeeded in getting new homes built and getting people to buy; Funding for Lending has begun opening up the wholesale market; GDP is already outpacing expectations (with further gains expected this year); consumer indicators are positive too; and although interest rate rises may be on the horizon, Governor Carney has given his commitment to keep them within reasonable levels going forward.

2. Foreword


So, with the recovery gaining pace, we should now be in a position where homeowners and buy-to-let investors can benefit from a reinvigorated mortgage market both in terms of improved access to credit and product innovation. As a specialist lender, we think the industry has a duty to provide realistic, sustainable, specialist mortgages that support modern homeowning aspirations and buy-to-let entrepreneurialism. Mortgage Voice provides a compelling and often surprising snapshot of the winners and losers in today’s marketplace. It certainly provides plenty of questions for the market, which it will need to address if we intend to meet future market need.”

The figures speak for themselves, don’t they?

3. Market overview


Lending data from CML shows double digit growth on 2013 figures. The Halifax property survey points to rising house prices not just in London but across the UK too. Confidence has returned to the housing market. This market optimism has dominated the media agenda with the clear indication that mortgages are once again readily available. To some extent lending stats bear this out with strong rises recorded on both first time buyer and buy to let mortgages as well as home-mover and remortgages. But is this the full picture? Do today’s consumers and buy to let entrepreneurs feel well served by the modern mortgage market?

4. A healthy market?


While the media has been quick to latch onto the newfound renaissance in the UK mortgage market, consumers remain largely pessimistic.

Consumers: views on the mortgage market



44%

17% 39%

53%

11%

Mortgage market is in poor health and repairing

slowly 46%

Mortgages are too difficult to obtain for the first time buyer

39%

Mortgages still favour those with large

deposits 53%

Mortgage market is in a poor state, with little likelihood of

repair 11%

Rental prices are too expensive

44%

Rent is lower than repaying a mortgage

23%

Unsure of the quality of

rented housing 17%



Opposite ends of the age spectrum (aged 16-24 years old and aged 55 and over) proved the most negative in their

responses

The ‘middle’ (aged between 25 and 45) appear more positive

Respondents were keen that eligibility for a home loan be assessed on an individual basis and ranked improved

access to mortgage products highly

Responses across UK regions were broadly similar

East and West Midlands were on par with London as the most optimistic about the future

Northern Ireland was noticeably more bearish

There are disparities in industry and consumer sentiment and some key demographic differences for considerations.

“It’s there to help first time buyers.”

“I know very little about it.”

“It’s not enough and other stimulants are needed.”

4. What help is available?


There has been activity from Government to stimulate the first time buyer market but it has low awareness and doesn’t go far enough.

40% 22% 10%

Impressions and understanding of Help to Buy

5. Eligibility & Access


0 %

10 %

20 %

30 %

40 %

50 %

60 %

Access tomortgages has

improvedsignificantly for

all

Access tomortgages hasimproved, but

not enough

Mortgages stillfavour those

with largedeposits to buy

a home

Mortgages aretoo difficult toobtain for the

first time buyer

The mortgage market doesn’t

cater well enough to those

who have blemishes in their credit

history

Mortgages aretoo difficult to

access if you areself-employedor a freelancer

Mortgages aregenerally

complicated, Ifind it hard to

understand themarket

None of theabove

Which of the following statements do you most agree with on access to mortgage lending?

For many, mortgages are assumed to be beyond their reach with concerns over access and criteria. Just 5% said that access to mortgages had improved across the board while 53% claim that mortgages continue to favour those with large deposits. Barriers to homeownership remain largely financial with saving a large enough deposit the primary impediment whereas elements such as credit score – previously considered to be a major concern – rank much lower with consumers.

*Respondents could choose three options.

5. Eligibility & Access


0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

Saving a largeenoughdeposit

Getting amortgage

Finding anaffordableproperty

Paying foranother largeevent first (i.e.

marriage orhaving

children)

Finding a property in

the area/region I’d

most like to live

Complicatedbuying

processes

My CreditScore

I don’t know

What do you see as your current barriers to buying a home?* CASE STUDY - FIRST TIME BUYER, FEMALE, 28 “I’d never really thought about saving for a home until circumstances meant that my partner and I had to move from our rented flat and find an alternative. We realised that perhaps it was time to begin considering our options to become homeowners. The main problem was how to pull together the deposit – we had no real savings. It wasn’t easy but we made the decision to sofa hop with friends and family – freeing ourselves of rental costs – in order to save as much as possible. We are due to sign the contracts on a flat imminently where we will be paying much less in mortgage repayments than rent and we will have made our first all important step on the property ladder!”

*Findings based on responses from 689 renters from a base of 2000 respondents. Respondents could choose all options that applied.

6. A nation of homeowners?


0 %

5 %

10 %

15 %

20 %

25 %

30 %

35 %

40 %

45 %What is your reason for not seeking to buy a property?

Homeowning remains an aspiration* • 62% of respondents who

want to own property in the future want to buy in the next 5 years

• As do 57% of those under 25 who want to own property in the future

But its perceived impact on social standing is diminishing • 24% of renters feel adversely

affected by not being a homeowner

*Findings based on responses from 222 renters who admit to aspiring to buy property in the future (total) and 44 under 25s. Respondents could choose all options that applied.

6. Why do consumers rent?


42% 37%

18% 33%

10% 13%

Couldn’t save for a deposit

Felt they could budget better

Could live in a better area

Could live in a larger property

No mortgage options available

Debt burden of a mortgage is too high


7. Rise of the rental market


With recent statistics suggesting that the number of people renting in London will soon outstrip homeowners, to be followed by other cities, it’s clear there needs to be a sea change in the market. This requires new kind of housing industry supporting both individual homeownership and a strong rental sector to meet changing consumer requirements.

0 %

5 %

10 %

15 %

20 %

25 %

30 %

35 %

40 %

45 %

50 %

Rental prices in myarea are too

expensive

Rental prices in myarea are fair

My monthly rent islower than if I were

repaying a mortgage

My monthly rent ishigher than if I wererepaying a mortgage

I question the qualityof what is available

on the rental market

I don’t know

What are your thoughts on the current rental market?




The burgeoning rental market has created a significant opportunity for private landlords; our research shows that they increasingly appear to be heeding the call.

0 %

5 %

10 %

15 %

20 %

25 %

30 %

35 %

40 %

I inherited aproperty andchose to let it

out

I moved inwith a partnerwho already

owned ahome

I let out aproperty I wasunable to sell

I bought aproperty for a

child atuniversity and

kept it on

Becoming alandlord was a

short terminvestment

decision

Becoming alandlord was a

long terminvestment

decision

It is my familytrade

Other

What influenced your decision to become a landlord?

• Four in ten (41%) private landlords see buy to let as an investment

• 85% of these are in it for the long term

• A high proportion (58%) are landlords by circumstance*

* Classified as those who inherited a property and chose to let it out (28%), moved in with a partner who already owned their home (20.5%) and those who let out a property I was unable to sell (13.5%). Taken from a survey of 200 landlords.



In terms of realising their investment, 12% plan to sell up in the next five years but far more wish to keep their buy-to-let portfolio until they retire or even beyond. All in all the portrait painted is of a very different buy to let landlord than the “speculator” of old, one who aims to steadily build up their portfolio over the years and reap the benefits in retirement.

18 %

7 % 7 % 10 %

12 %

8 %

18 %

27 %

23 %

0 %

5 %

10 %

15 %

20 %

25 %

30 %

I aim to increase myportfolio by 1 - 2

properties per year

I aim to increase my portfolio by more than

2 – 5 properties per year

I aim to increase myportfolio by more than5 properties per year

My buy-to let portfoliowill become my main

source of income

I hope to sell my entirebuy-to-let portfolio

within 5 years

I hope to sell part ofmy buy-to-let portfolio

within 5 years

I aim to keep my buy-to-let portfolio until

retirement

I will keep a buy-to-letportfolio beyond

retirement

I don’t know

What are your aspirations for developing your buy to let portfolio?

*Findings based on responses from 200 landlords. Respondents could choose all options that applied.

7. Buy to let landlords - views


3-5

18% aim to keep their buy-to-let

portfolio until retirement

18% aim to increase their portfolio

by 1-2 properties per year

12% hoped to sell their entire buy-to-let portfolio within 5 years

10% say their buy-to-let portfolio

would become their main source of income

27% aim to keep their buy-to-

let portfolio beyond retirement

CASE STUDY - BUY TO LET LANDLORD, MALE 29 “I bought a cheap flat as a repossession in 2009 but always had a goal of buying a house before I turned 30. In early 2013 the property market lent itself to this opportunity. When the offer was accepted I borrowed half of the deposit from family as I didn’t want to raise the money from selling my first flat – instead I wanted to hold on to the property and let it in order to pay off the mortgage on the house. This was a conscious decision as part of a longer term plan to acquire and manage more properties. “

*Findings based on responses from 200 landlords

8. Conclusion


The mortgage market is stronger and more resilient than it has been in a long time. However, this confidence and buoyancy has not filtered down to the end consumer. It is important to ask whether the significant demographic and lifestyle changes seen in the last 10 to 15 years have been acknowledged and responded to by industry. We as a nation are renting longer and later in life, are more likely to move from job to job rather than stay put in one position and could very well become a landlord by circumstance rather than design. This puts a clear onus on the mortgage market to work with consumers to develop a truly modern suite of buy to let and homeowner products which meet the needs of modern applicants. There have been some important developments yet it is still early days in broadening the criteria for mortgage approval to support homeowning and buy to let entrepreneurialism.

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Mortgage Voice: Mapping the Mortgage Market; Meeting Market … · 2014-07-24 · Mortgage market...

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