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Should lenders consider a change of tack?
Date posted: Sep 1 '11 Posted By: Jeff Quilter Comments: 0
Its been an interesting few days for the housing market. The data released by the National Housing Federation supports recent stories that suggest renting is on the rise, with its research forecasting a fall in the number of people living in owner-occupied homes from 67% this year to 64% in 2021. It also predicts that 6 in every 10 Londoners will live in rented accommodation by 2021.
Home ownership levels peaked at 72.5% in 2001 but high property prices and, post credit crunch, tighter mortgage criteria applied by banks and other lenders sparked an end to the rise. Anecdotally, I'm not sure the demand for mortgages has dipped, but for first time buyers, getting a foot on the ladder is arguably harder than ever.
Halifax has reported that the proportion of disposable incomes devoted to mortgage payments is at its lowest for 12 years. It cites the sustained low Bank of England base rate and its impact on mortgage interest rates, but restricted loan to value ratios offered by mortgage lenders, combined with far more rigorous lending criteria, has made the process of securing funding for first time buyers a difficult and sometimes impossible process.
So what does this all mean?
Well its difficult to say. The UK's love for home ownership is not likely to subside completely, but lenders have learned hard lessons over recent years and that is almost certainly going to impact the supply of mortgages for certain sectors of the home buying population.
Renting may increase in popularity and this could increase pressure on social lending and also stimulate demand in the buy to let sector. Albeit without the benefit of a crystal ball, lenders need to consider carefully their strategic direction over a ten year period and perhaps look more closely at diversification strategies and adjacent markets to their core markets - spread their risk essentially.
Unsecured lending (with its numerous faces) and savings are obvious considerations and HML has already identified these markets as two spaces where our core competencies and servicing expertise could provide a very cost effective outsourced solution.
Watch this space.
