What does 2016 hold for the mortgage market?
Simply Biz editorial
By Louisa Sedgwick, Head of Intermediary Distribution at Leeds Building Society
Big changes to Buy to Let, preparation for the Mortgage Credit Directive (MCD) and hints at upcoming interest rate rises: there’s no doubt that 2015 was a big year for the mortgage market. However, with the fall out of these changes only now starting to come into fruition, it could be 2016 that proves the more challenging, and rewarding, for intermediaries.
While last year brought preparation for the introduction of MCD, 2016 will be the year that brokers need to really focus on what the new legislation means for them. With different approaches to MCD by lenders likely, the main challenge for brokers will be working out which lenders are interpreting the legislation in which way. I see Q2 being the quarter in which we start to see the real implications of this new legislation on the mortgage market.
Buy to Let is another area where we will see 2015 changes really come into fruition. With the stamp duty rise coming into effect from April 2016, I expect Q1 will bring an influx of smaller, amateur landlords wanting to buy ahead of the rise which could see lenders introducing some very competitive BTL products. Moving past Q1, I don’t see many knock on effects from the stamp duty changes. Although the exact figure is difficult to substantiate, we believe that around 60% of BTL transactions are remortgages, and with a large professional landlord market, which may be largely unaffected by the changes, I see the remainder of 2016 being business as usual for the BTL market.
There has also been a lot of chatter regarding a potential interest rates rise. I can’t see this being any larger than 0.25%, which shouldn’t make customers with a variable rate mortgage too uncomfortable, but could provide shrewd brokers with a golden opportunity to promote their remortgage offering. If we do see a big rise of between 0.5%-1%, expect a mass market change as customers scramble to remortgage.
2015 saw a few of the mid-market lenders offer more innovative products, including a small but significant increase in later life lending. While later life products have the potential to take off in 2016, it will need either a lot of mid-market lenders or a big player to get involved before we see it become easier for older people to secure mortgages. It is also a change I expect to be driven by the building societies, who have more scope for longer term investment than the PLCs.
At Leeds Building Society, 2016 will be the year we increase innovation in our own products, expanding on and improving existing products to offer more choice for customers and to ensure we remain one of the top 5 lenders for product pricing.
The information is for FCA authorised intermediaries only, and must not be shared with potential borrowers