UK Mortgage Market Outlook: Q1 2007 (Market Focus)

SUMMARY

Abstract

Overview

Introduction

After a record performance in 2006, the UK mortgage market continues to exceed expectations, delivering another record performance in Q1 2007. Indeed, the likely effects of successive increases in the base rate have yet to be reflected in consumer demand. However, it is highly likely that demand will slow during the remainder of 2007 in the wake of further potential increases in the base rate.

Scope

• Provides the latest marking sizing figures for the UK mortgage market and analyses industry trends in the Q1 2007.
• Details Datamonitor's latest scenario based forecasts for the future of the UK mortgage market in an accompanying interactive Excel model.
• Provides a regulatory update.
• Covers innovative mortgage products introduced in Q1 2007.

Report Highlights

The robustness of housing activity in the first quarter of 2007 was reflected in mortgage lending. Indeed, data from the Council of Mortgage Lenders (CML) highlights that gross advances in the UK mortgage market reached a staggering £83.9 billion in the first quarter of 2007, the highest lending ever reached in the first quarter of any year.

While the latest increase in the base rate is likely to be an issue for overstretched borrowers, the overall impact of the one percentage point raise in the base rate since August 2006 is likely to have a cooling effect on the UK mortgage market.

The latest episode in the never-ending saga of the HIPs regime and the various volte-face of the Government further highlight the inefficiency of the latter with regards to this piece of legislation.

Reasons to Purchase

• Review market performance in Q1 2007 to place your performance in context to the market's.
• View the latest independent annual forecasts for the UK mortgage market to plan your future strategy with confidence.
• Understand the key challenges facing lenders in 2007 and the impact they are having on the market.

TABLE OF CONTENTS

Table of Contents

• DATAMONITOR VIEW
  • CATALYST
  • SUMMARY
• ANALYSIS
  • The UK mortgage market kicked off strongly in 2007 with £83.9 billion in gross lending in Q1
    • Despite successive increases in the base rate, housing activity has remained strong in Q1 2007
    • Highest Q1 lending on record in 2007
      • All product lines benefited from a strong mortgage market in Q1 2007
  • Sound macroeconomic indicators have continued to drive mortgage lending in Q1 2007
    • A healthy macroeconomic environment has contributed to strong mortgage lending in Q1 2007
      • GDP growth has remained healthy in Q1 2007
    • House prices rose further in Q1 2007
      • Unemployment has remained low in Q1 2007
  • Despite strong lending so far, the UK mortgage market is likely to cool down over 2007
    • The base rate was increased further in order to curb Inflationary pressures
      • Higher costs of borrowing are likely to put more pressure on indebted households
      • Higher interest rates are likely to lead to a lower housing activity level over the remainder of 2007
    • Datamonitor's previous forecasts are still pertinent
      • Under the Datamonitor View, the UK mortgage market will continue to grow but at a slow rate
      • Given the unpredictability of the UK mortgage market, Datamonitor has analyzed two additional alternative scenarios
  • Latest regulatory update and production innovation in the UK mortgage market
    • Regulatory update: HIPs implementation date postponed
      • Other mortgage-related regulatory updates at a glance
    • A couple of innovative mortgage products were launched in April 2007
      • GMAC-RFC launched its MERC mortgage product with a redemption swap feature
      • John Charcol launched a 'rent-a-room' mortgage in partnership with West Bromwich Building Society
• APPENDIX
  • Definitions
    • Bank of England base rate
    • Buy-to-let mortgage
    • CAGR
    • CCJs
    • Gross advances
  • Methodology
  • Forecasting methodology
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
    • Table 1: Forecast macroeconomic variables used in the Datamonitor View scenario, 2005-2011f
    • Table 2: Forecasted gross advances in the UK residential market by product lines under Datamonitor view, 2006-2011f
    • Table 3: Forecast macroeconomic variables used in the pessimistic scenario, 2005-2011f
    • Table 4: Forecasted gross advances in the UK residential market by product lines under a pessimistic view, 2006-2011f
    • Table 5: Forecasted gross advances in the UK residential market by product lines under an optimistic view, 2006-2011f
    • Table 6: Forecast macroeconomic variables used in the optimistic scenario, 2005-2011f
  • List of Figures
    • Figure 1: Housing activity in Q1 2007 was stronger than in Q1 2006, March 2005 to March 2007
    • Figure 2: Gross lending in Q1 2007 delivered a record performance, Q1 2002 to Q1 2007
    • Figure 3: All product lines have benefited from the strong mortgage market in Q1 2007, Q1 2003 to Q1 2007
    • Figure 4: The average UK house price increased further in Q1 2007, Q1 2002 to Q1 2007
    • Figure 5: Under Datamonitor View, gross advances in the UK mortgage market will reach £357.2 billion in 2007, 2006 to 2011f
    • Figure 6: Under the pessimistic scenario, gross lending in the UK mortgage market will reach a low of £282.8 billion in 2008 before picking up again, 2006 to 2011f
    • Figure 7: Under the optimistic scenario, gross advances in the UK mortgage market will reach £437.6 billion in 2011, 2006 to 2011f