The mortgage market today – FCA analysis of an evolving sector

07 February 2019

From the pre-crisis period to the present day, proprietary FCA data paint a picture of a market in flux.

The proportion of borrowers who will be aged 66+ when their mortgages mature is on the rise.

  • In 2015, 26% of all mortgages were due to mature when the borrower was 66 or older. In 2018, that figure had risen to 30%, an increase of almost 411,000 mortgages.
  • In the great majority of cases (94%) the increase will see the mortgage mature when the borrower is aged between 66 and 70.
  • All regions have seen an increase, with the biggest occurring in London, South East, South West, and Eastern.

The average age of first-time buyers has changed very little.

  • Since 2005, the average age of first-time buyers has risen by only about 1 year nationally (0.9 years).
  • Regionally, the largest increase was in Northern Ireland (1.8 years) and the smallest increases were in Scotland and the South West (0.7 years).  

The median mortgage term is increasing.

  • Following the introduction of stricter lending criteria, interest-only mortgages, and their lower monthly payments, have been in decline. In 2006, such mortgages accounted for 35% of all sales, but today only have a 4% share. In response, many buyers have opted for longer terms to aid affordability.
  • Between 2006 and 2018, the median mortgage term for first-time buyers increased from 25 years to 30 years.
  • 37% of first-time buyers who purchased in 2006 had mortgage terms of more than 25 years. Today that figure has risen to 66%.
  • Across all mortgage sales, 41% have terms of more than 25 years today, up from 14% in 2006.

Lending to the self-employed is increasing, but it is at a significantly lower level than pre-crisis.

  • In 2006, around 17% of all mortgage sales were to self-employed borrowers. Today the figure stands at 11%.  
  • This follows a sharp decline post-crisis (from 2008 until 2012). While there has been a gradual rise since then, today the number of sales is still only about a third of those in 2006.
  • A major cause of this was the decline of self-certified mortgages. These were mainly sold by specialist lenders (primarily non-banks), and were withdrawn post-crisis as many of these firms exited the market. Regulatory requirements for all mortgages to be income-verified have mitigated against the re-emergence of self-certified products.

Rates of remortgaging are on the rise, but remain below pre-crisis levels.

  • In 2007, 50% of all mortgage sales were a result of remortgaging. By 2018 that figure had dropped to 39%.
  • Remortgaging levels are gradually recovering following their post-crisis dip, but sales volumes are still less than half their pre-crisis level.
  • Nevertheless, there has been an uptick since 2014 as lenders have increased their efforts to attract borrowers from competing providers.
  • Lenders are also focusing more on customer retention. Internal switching, where borrowers move to a new deal with their existing lender, accounts for a significant and growing amount of business (see UK Finance data).

The proportion of lending at 90%+ loan-to-value (LTV) has recently increased.

  • Lending at 90% LTV or more has risen from 6% in 2011 to 14% in 2018, with building societies in particular increasing their volumes in this sector. This follows a pre-crisis high of 18% in 2006.
  • First-time buyers account for 68% of mortgages with a 90%+ LTV, up from 48% in 2006.

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