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Buy to let mortgages grew at 49% in last 12 months as other home loans fall. Rise in number of applications declined

5th October 2016

The number of Buy to let mortgage loans grew 49% in the last 12 months while loans to first time buyers grew at a paltry 0.7% and the number of home loans generally actually fell 5.65 according to the latest edition of the Mortgage Efficiency Survey conducted by technology supplier IRESS.

The fifth annual survey analysed the responses of 18 lenders, with a combined share of gross mortgage lending of 68% in 2015, equating to £152bn of loans.

The number of acceptances for mortgages has declined in all sales channels: with accepts in branch dropping by 20%, in consumer by 18%, in telephony by 15% and by 9% in the intermediary channel. Banks have a significantly higher percentage of accepts than mutuals, likely to be due to banks investing in more sophisticated decision and income verification, differences in risk appetite and application complexity.

Mortgage brokers and IFAs continued to hold the lion’s share of the mortgage market, with 82% of sales now going through this channel and almost three quarters (70%) of lenders experiencing an increase in the number of applications submitted by brokers over the last year.

The direct channel continued to decline across branch and telephony, although sales via the internet increased, albeit from a low base. The internet channel remains a relatively small part of distribution, but as new digital entrants and so called “digital” brokers enter the market, this channel could double in the next 18 to 24 months.

The survey results show that the impact of the Mortgage Market Review (MMR) is still apparent, with average number of days to offer, a key measure of efficient customer service, significantly higher than pre MMR levels, although there has been a slight improvement over last year.

Lenders’ use of digital technology grew over the last year, with mobile quote and decision in principle increasing by 185%, case tracking by 72% and full mortgage application by 117%. More lenders are now providing direct and in-branch video links to mortgage advisers, offering more options to consumers and enabling more direct sales per adviser to be processed.

Henry Woodcock, principal mortgage consultant, IRESS, said: “The most significant finding in the survey is the continued rise of the buy to let market. This sector has increased by more than 213% over the five years since the first IRESS Mortgage Efficiency Survey, but with the recent change of taxation around investment purchases for landlords, it seems unlikely that this stellar growth will continue. In the last year, loans to first time buyers have been fairly flat, suggesting that despite government incentives and innovative products offered by lenders, the struggle to get on the housing ladder remains a significant challenge.”

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