What will 2017 look like?


Pete Mugleston

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Industry Experts: What you need to know

For many 2016 was a belter, for others it was a turbulent time of change. Wherever you stood as a consumer or someone working in financial services dictated your experience: Specialist finance brokers, lenders, and niche customers have never had it so good with more inclusive criteria and some of the best rates ever seen; whereas those in buy to let, commercial, and peer to peer markets felt the brunt of uncertainty and tighter regulation, with secured loan firms forced into costly and drastic change.

Many would say at this early stage that 2017 will be set for more of the same, but is it? To find out, we’ve pulled together expert opinions from across the market to give us the low down on how 2017 will pan out, as well as the key things to watch as the year progresses.

What you need to do now...

 

of experts feel positive about 2017
Of all the experts we asked, almost all of them are positive about what's to come this year. Many share concerns over uncertainty with Brexit, Trump and value of the pound, but agree that the economy has reacted far better than expected, and don't anticipate doom and gloom in a resilient housing market.

 


80% of experts believe lenders are well funded for 2017

All the lenders we spoke to are confident they have deeper pockets than ever, not just for the year ahead but the next few, many of whom are backed up by increases in their own bank deposits, and optimistic contracts secured with private investment, renegotiated and signed post-Brexit. From this, we don't anticipate a repeat of 2009 where funding was scarce.

 


100% of experts think mortgages are available to more people than ever

Wherever you look in the mortgage world, the opportunity as a borrower has never been so good. Speaking to a cross section of the market, from lender MD's to advisors on the front line, it's unanimous that borrowers on the fringes from all manner of niche areas are now more able to borrow, and with more lenders coming to market and rates continuing to break records this trend shows no sign of stopping.



Split opinion over house price trajectory

When being asked about the future of house prices, the experts were divided. Thankfully none anticipate a crash in values, and the majority predict long-term growth (steady or quicker), with several suggesting the possibility of fluctuations / a bumpy ride / a correction in what are currently potentially 'artificially high' values in the shorter term.

 



Everyone feels Brexit has had less impact than expected

Most who were imagining post-Brexit doom and gloom, including our panel of experts and leading economists, were as surprised at the resilience of the economy as they were the Brexit result. Whether things change as we approach article 50's invocation is of course yet to be seen, but long may our stability and growth continue!

 



90% of experts believe BTL is still a good investment

With rates so low its a great time to borrow, and a terrible time to save, with those lucky enough to have significant capital struggling to finding a decent return. Property investment and buy to let has certainly taken a battering in 2016 and although not as attractive as it once was, most feel there are still capital gains to be had longer term, especially with the ever-green issue of housing demand outgrowing supply.

 


Meet the experts



Tim Wheeldon Chief Operating Officer @ Fluent Money

Interview




Phil Whitehouse
MD @ MCI Mortgage Club

Interview




Liz Syms
MD @ Connect Mortgages

Interview




Jo Breeden
MD @ Crystal Specialist Finance

Interview




Carolyn Thornley-Yates
Head of intermediary Sales @ Hinckley & Rugby Building Society

Interview




Les Tonks
Director @ Midas Accountants

Interview



Mark Flower
Head of Commercial Mortgages @ Business Finance Quote

Interview




Steve Sharp
Director @ ADS Accountancy

Interview




Jamie Pritchard
Head of Sales @ Precise Mortgages

Interview




Graham Felstead
Head of Intermediary Mortgages @ NatWest

Interview




Charles Haresnape
MD @ Aldermore Mortgages

Interview




Louisa Sedgwick
Director of Sales @ Vida Homeloans

Interview




John Gathergood
Associate Professor of Economics @ Nottingham University

Interview




Matt Tooth
Chief Commercial Officer @ LendInvest

Interview




Joanne Jones
Property Partner & founder @ Simpson Jones Solicitors

Interview




Richard Angliss
MD @ Home Buyer Systems

Interview




Robert Gardner
Chief Economist @ Nationwide

Interview




John Heron
MD @ Paragon Mortgages



Keith Street
Vice Chairman, Group Lending @ The Northview Group

Interview




Matt Andrews
MD @ Bluestone Mortgages

Interview




Melanie Powell
Economist @ Derby University

Interview




Dr Eugene Michaels
Economist @ Derby University

Interview



Quotes & Summaries

Key Talking Points

  • Climate
  • Brexit
  • Funding
  • House Prices
  • Criteria
  • Future of BTL
  • Robo Advice

Financial Climate in 2017: Many are excited about the new year and what’s to come for the housing market, whilst others are dreading another year of change and uncertainty. We asked the experts for their opinion.
The general consensus is that 2017 will be a year of uncertainty, however almost all experts we interviewed have a positive outlook for what’s to come. Yes, it is likely that Brexit and Trump will impact what happens in the market and perhaps looking further ahead we may see these decisions cause some temporary unrest, but the overwhelming opinion is that housing is a resilient market, underpinned by demand for homes continuing to outstrip supply.

What the experts say...

John Gathergood
Associate Professor of Economics @ Nottingham Uni

Undoubtedly 2017 will be another year of volatility and uncertainty about the future of the economy – with Brexit and many important European elections coming up this year. The economy is doing remarkably well given the uncertainties of current times.

Jamie Pritchard
Head of Sales @ Precise Mortgages

We’re very optimistic about 2017. Time will tell what effect the regulatory changes will have on the BTL market, but I’m positive that our diverse range of products will see us perform as well as, if not better than, in 2016.

Phil Whitehouse
MD @ MCI Club

The housing market is built on confidence and this may take a few hits during 2017 but the fundamentals of the market still remains very strong underpinned by a large shortage of housing and what is seemingly ever increasing demand.

MMR, MCD, numerous tax changes to impact homeowners and landlords - have these done what they were supposed to do, and if not what's next? Are we scrapping them all with Brexit as we “take back control” of our own regulation, or will things stay as they are?
Tighter regulation in financial services has been welcomed unanimously as most people recognise that the circumstances leading to 2007 were morally and economically unrepeatable, and it seems unlikely that the European directives we’ve all adjusted to would be thrown out and replaced, certainly not any time soon. Although many shared concerns that a vote to leave the EU would cause economic turmoil, even leading economists have been surprised by how resolutely the economy has reacted and that we aren’t facing the ‘great depression’ some remainers’ forecast. That said, the fall of the pound is sure to have longer-term impact on business in the UK, and a lot will depend on the result of the upcoming negotiations. Whatever happens between now and post-article 50, there is uncertainty in the air, and this rarely has a positive impact on the economy.

What the experts say...

Mark Flower
Head of Commercial @ Business Finance Quote

I hope but also believe the UK will negotiate a good deal for this country, and I have always been a believer in less rather than more red tape. Thus exit could prove to be a great positive for this country and the property sector. We will have freedom on setting taxation levels, interest rates, regulations etc, and capital might take flight to our country given what is happening in some of the Euro currency denominated countries.

Carolyn Thornley-Yates
Head of intermediary Sales @ HRBS

As recent changes are already partially or fully embedded, and with Brexit looking to be a very long drawn out process, it is our opinion that things will stay as they are on the regulatory and fiscal front. The new EU data protection regulation due in 2018 is confirmed to proceed regardless.

Charles Haresnape
MD @ Aldermore Mortgages

There will always be a period of friction whenever new legislation is introduced as it beds into the market, but regulation such as MMR, which was designed to make lenders behave more responsibly, should always be welcome. We should get more clarity on plans for the future of the UK’s housing market when the white-paper is released, but as it stands the FCA has said there are no plans to roll back the MCD regulation.

Is 2017 going to be another 2009? Earlier in 2016 there were reports that specialist funding lines were suspended as the dust settled after the vote to leave the EU, whilst many BDMs tell us they have loads of cash and high targets for the next 3-4 years, despite Brexit. How well funded are specialist lenders and is it only a matter of time until the market dries up? 

From the lenders we have spoken with, none of them have any lending concerns whatsoever. With BoE also doing a lot to ensure funds are plentiful (perhaps even going too far), funding transactions remain buoyant. Most lenders experienced their best year since 2008 and are looking forward to bettering it in 2017 despite potential turbulence.

What the experts say...

Tim Wheeldon
Chief Operating Officer @ Fluent Money

There is no comparison between 2009 and today. Back then, the securitisation market was shut and lenders and funders were pulling up the drawbridge. In 2017, our lenders are in a very different situation and we are confident that funding will not represent an issue this year or for the foreseeable future.

Jo Breeden
MD @ Crystal Specialist Finance

Certain lenders have gone down the banking route, so are taking their own deposits which gives them more funds to be able to lend out, rather than being reliant on wholesale markets and the volatility that could expose them too. One thing that has been shown in recent years is how resolute the housing market is in the UK.

Louisa Sedgwick
Director of Sales @ Vida Homeloans

We can’t speak for other specialist lenders. We are well-funded and backed by significant private equity and banking warehouse providers on terms that are over several years. So we are looking forward to 2017.

With house prices in London and further afar stalling and in certain areas falling recently, should we view now as the peak? What advice would you give to potential investors/home movers in terms of when they should buy?

No one, myself included, likes to pretend they know where house prices will be at the end of 2017, but expert opinions all echo similar projections – perhaps a bumpy ride short term (with so many economic balls in the air), steady growth medium-long term. After such a swell in property prices over the last 3 years it’s of course possible the market could ‘settle down’, and recent signs are that this may be the case. That said, with demand for housing increasing faster than the rate of supply, it’s hard to imagine a crash is on the horizon, especially as the market appears to be so well funded.

If you’re buying for short-term capital growth, you may have missed the boat, if you’re buying for the long-term there doesn’t appear to be any signs this is a bad idea.

What the experts say...

Liz Syms
MD @ Connect Mortgages

Trying to predict when to purchase a property is like trying to pick when to invest in the stock market! As long as you are not trying to make a killing within a couple of years and buy with a long-term view, home movers should buy the best they can afford and investors should buy for strong yields and cash flow which is more predictable than second guessing movements in property values.

Robert Gardner
Chief Economist @ Nationwide

Looking forward, house price prospects will depend crucially on developments in the wider economy, around which there is a larger degree of uncertainty than usual.

Like most forecasters, including the Bank of England, we expect the UK economy to slow modestly next year, which is likely to result in less robust labour market conditions and modestly slower house price growth.

Matt Andrews
MD @ Bluestone Mortgages

Prices will continue to fluctuate and unavoidably sky rocket because demand in the housing market continues to outweigh supply. In order to allow more people to get onto the housing ladder, more affordable housing needs to be built with realistic, affordable lending options made available to support new buyers with one of the biggest financial decisions they will make in their lives.

Lending criteria has constantly developed and moved into wider niche areas over the last 3 years and specialist lending has increased in a big way. Do you see this trend continuing, and if so, into which niche areas do you envisage lending to next?

Lenders and brokers agree that criteria has developed massively in 2016, reaching into new markets that perhaps were untouched even pre-credit crunch. Specialist lenders now compete on price too, which has made them unable to ignore for many brokers who’d traditionally only advise on high street deals. That said, the market still has a way to go in terms of educating brokers, as the uptake of new registrations with new lenders has not been absolute.

What the experts say...

Charles Haresnape
MD @ Aldermore Mortgages

The market is indeed becoming more and more specialised, and as such the idea of ‘the average borrower’ is becoming obsolete. Self-employed workers are a great example where they may be perfectly credit-worthy but are disadvantaged by a computerised process. Specialist lenders are able to take a more hands-on, manual approach to get a better picture of a customer’s situation. As lending criteria has tightened in the market, it is always borrowers on the fringe who suffer from a one-size fits all approach. Therefore the number of customers requiring bespoke financing options is likely to grow.

Phil Whitehouse
MD @ MCI Club

Niche lenders have increasingly come to market with competitive products and made it easier for intermediaries to access their products through Mortgage Clubs by wider BDM coverage and attending specialist industry events and roadshows. In 2017 I see that improvements to sourcing systems and general awareness should help brokers access niche products and so an increase in this market is highly likely.

Carolyn Thornley-Yates
Head of intermediary Sales @ HRBS

In 2016 we reintroduced interest only lending, launched a joint borrower/sole proprietor proposition and outlined our plans to accept personal income to supplement small rental income shortfalls on BTL applications. We anticipate that our involvement in niche lending will evolve further in line with changing market conditions and new regulation.

What future is there in the BTL market? With all the tax changes and the regulator getting involved in lending policy, do you see the rental market as an attractive investment? And do you foresee any further regulatory measures being imposed?

It’s fair to say that landlords and lenders have both taken a bit of a kick-in in 2016. What was once considered a safe and sure thing for a regular return on your money, is now regarded by some as a very different type of investment. Professional landlords were hit the hardest, with increased stamp duty; higher taxes; and lending restrictions making life incredibly hard for many, particularly for those that borrowed to finance their portfolios.

For the new landscape in 2017, accountants point investors toward semi-commercial Ltd company borrowing as the sensible option, which has spiked enquiries and seen lending in to SPV’s and other property businesses at an all-time high. If however, one looks to save tax by switching properties into a Ltd company structure, they’re faced with stamp duty and capital Gains, as well as new affordability rules that may leave them trapped between the current mortgage, and rock, and hard place.

That said, with savings rates being non-existent, there’s hardly a plethora of attractive alternatives out there, and experts stand by BTL as a long-term investment, whilst also anticipating an increase in specialist lending for 2017 as serious developers look harder for opportunities to make a more immediate return.

What the experts say...

Keith Street
Vice Chairman, Group Lending @ The Northview Group

Whilst further regulatory changes are possible, we do hope that landlords are given time to adjust to the raft of measures that have been implemented in 2016. Whatever the circumstances, we are confident that the market will respond to any further changes and provide the support that landlords need. This is still a significant part of the mortgage market worth £227bn and it’s important to remember that UK property remains an attractive investment opportunity for many people in a low interest rate economy.

John Gathergood
Associate Professor of Economics @ Nottingham Uni

The government has certainly identified the BTL market as a focus for increased taxation and targeted incentives to reduce the attractiveness of BTL. However, given poor annuity rates and uncertainty over annuitisation rules, and low rates of return on most investment options, the BTL market is still very attractive for investors.

Jamie Pritchard
Head Sales @ Precise Mortgages

When I talk to landlords and ask them if they are going to sell their BTLs, the answer is always a ‘no’. BTL remains an attractive investment for many, especially when you consider the current returns on pensions and saving accounts. It’s important that both brokers and investors are fully aware of the changes and what are best tax structures for their BTL investments to be held in are.

With the recent introduction of robo-advice and some well-known names employing the artificial intelligence of IBM Watson, how will technology improve customer experience in the mortgage industry, and is technology going to take our jobs?

I read a Warren Bennis quote not long ago that “in the future our workforce will be 2 employees – a man, and a dog – the dog is there to guard the equipment, and the man is there to feed the dog”, and it has got me thinking about the future of financial services. Whilst my attitude toward developments is optimistic and excited, others are more sceptical on how robo-advice will shape the industry.

One thing is for sure, it certainly isn’t going away. Far from it. Many (myself included) see robo-advice as the natural development of the industry, which for years has been behind the times, held back by clunky archaic banking systems that thankfully are now, slowly, being weeded out of existence. Call it evolution, natural selection, voodoo – the use of automated systems to remove barriers between the customer and their goal is good business and common sense.

Where could it be best used? Advisors on the front line don’t need help with advice, they struggle most with gathering paperwork to evidence ID and income, and it has always seemed counter-intuitive to me that lenders need bank statements when the data is all stored electronically these days. The effort taken to print what is a digital record into analogue format and then post/ scan and upload into a digital image to be stuck into a queue for a human to analyse, slows applications no end, weeks for many online/telephone sales. If systems were in place, affordability assessments could be automatic, negating the need for income evidence or bank statements at all.

Will we be here just to feed the dog? Maybe one day, but I’m not convinced underwriters and brokers will be the ‘luddites’ smashing up their computers in protest anytime soon. There may be job losses in some document checking centres around the globe, but history tells us that development and increases efficiency actually creates jobs in new areas, producing a net gain, not loss.

As for this year, I have a feeling that 2017 will see some major advancements, as firms attempt to harness the power of the governments ‘Open Banking Initiative’, which, we hope, will go some way toward making our lives a little easier. Bring it on.

What the experts say...

Richard Angliss
MD @ Home Buyer Systems

If we were talking about “our jobs” being Advisor’s jobs and a system existing that required a customer to click a button and they instantly get a mortgage, then definitely no is the answer. They [lenders] provide the tools for a customer to do pretty much everything themselves (or that is what they are striving for) but at every step of the way is a button that says “Click Here To Speak To Us” or similar. They know that at some point in the process the customer is going to get to a point where they become uncomfortable and will seek help.


Richard Angliss
MD @ Home Buyer Systems

The constant driver of change though has always been regulation. However, in recent years the emergence of the concept of robo-advice has taken centre stage.

There is absolutely no doubt that this is here to stay and is not a trend that is here today and gone tomorrow… technology has evolved to a point that will allow all the “sticking points” to be smoothed out allowing the inevitable benefits to happen.

Dr Eugene Michaels & Melanie Powell
Economists @ Derby University

In the fund management sector, the growth of robo-advice platforms will certainly continue to speed up, putting downward pressure on charges from managed funds. The benefit to consumers is better comparison of service and returns, and lower costs.

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