UK Housing market
UK Housing transactions have been relatively flat over the last few years as summarised in the chart below:
In the first six months of 2018 however, housing transactions fell by 5%. Overall house moves are low versus historical averages and they remain in a flat, yet relatively stable, environment, with the current house purchase market remaining predominantly comprised of those moving home due to non-discretionary lifestyle factors, first time buyers and serious investors. There are multiple factors that contribute to this, including constrained affordability, increased levels of stamp duty for some, lack of available property to move to and, of course, an overall air of uncertainty driven by the Brexit agenda.
With regards to house prices, the picture is somewhat regional or even local, with house prices falling most notably in London, South East and East Anglia whilst the South West, East Midlands and North East are broadly flat. Rises have been recently seen in Northern Ireland, Scotland, West Midlands, Wales, Yorkshire & Humber and the North West (UK Residential Market Survey by the Royal Institute of Chartered Surveyors, November 2018).
However, we expect this prolonged period of lower housing transactions to contribute to the pent-up demand that at some point will need to be released, perhaps when consumer confidence returns, and the post-Brexit landscape becomes clearer.
UK mortgage intermediary market
The current and new/future lending in the UK mortgage market and the intermediary share of that market is summarised below:
Remortgages are where a customer moves their mortgage to a new lender after the end of a fixed term with a different lender. By contrast, a product transfer is when a customer stays with the same lender after the end of their fixed term and moves on to another product with that same lender.
Historically, lenders offered their customers Product Transfers directly, with intermediaries having very little input into the Product Transfer market. Recently, however, many lenders have recognised the value intermediaries can bring to a customer decision and have now engaged intermediaries to help them to retain their customers through the active facilitation of Product Transfers. MAB estimates that the intermediary market share of Product Transfers is already in excess of 30%. This development presents incremental customer interaction and new opportunities for MAB advisers, especially as MAB has traditionally been predominantly a house purchase focused model. We expect activity in this area to remain strong, and MAB is well positioned to capitalise on this development and grow its market share.
A new market segment that is emerging and will be highly intermediated is lending into retirement, or, so-called ‘Later Life Lending’ as lenders introduce a far wider range of products for customers over 60 years of age. The most specialist part of this market, namely “Equity Release” where no repayments of capital or interest are made, although growing, will remain quite small in the overall context of the anticipated growth in Later Life Lending. Some lenders have already expanded their mortgage portfolios to also include products that help customers to borrow money at older ages, and, also to borrow that money until they are much older. This relaxation or innovation is in response to demand from an ageing population, and those that want to provide intergenerational assistance to help family members to fund university or a first home for example.
It is estimated that Later Life Lending will represent c.£80bn of additional outstanding mortgage lending by 2027. It is also estimated that the housing wealth of the ‘over-55s’ is worth £2.5 trillion. Again, the anticipated growth in this market presents MAB with incremental opportunities, as a direct result of a new and growing market segment which will be highly intermediated (c. 95%).
UK Protection Market
It was estimated by Swiss Re in May 2017 that the protection gap in the UK was £2.5 trillion. This represents a considerable opportunity for MAB as our advisers are not only focussed on getting customers into their new homes, but also keeping them there if an unexpected event occurs in their lives.