49% increase in buy to let compared with 2015 Survey
First time buyer sales remain flat with just 18.3% of sales
82% of mortgages were introduced by intermediaries, up from 78% in 2015 and 56% in 2014
70% of lenders have seen an increase in lending volumes via intermediaries
Cases going to offer in 10 days or less were down 37% compared to pre Mortgage Market Review levels
Mobile services on the rise with 185% increase in mobile quote and decision in principle
The buy to let sector continues to go from strength to strength, according to the latest edition of the Mortgage Efficiency Survey conducted by IRESS, the leading supplier of technology for wealth management, financial markets and the mortgage industry.
The survey provides insight across many aspects of the mortgage market and application processing. Now in its fifth year, the 2016 survey analysed the responses of 18 lenders, with a combined share of gross mortgage lending of 68% in 2015, equating to £152bn of loans. Among the survey participants, the buy to let sector saw by far the largest year-on-year growth at 49%, while mortgages to first time buyers saw just a 0.7% increase and residential loans to home movers actually fell by 5.6%.
The intermediary channel continues to see 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
A further key finding was that the number of accepts 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 decisioning and income verification, differences in risk appetite and application complexity.
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, commented: “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.
“The survey also shows that two years on, MMR continues to impact the time taken to process mortgage cases. We believe that the average number of days to offer will only improve significantly when the valuation process is fully digitalised and developments in sharing of current account and credit data come to fruition to enable lenders to use automated income and expenditure verification.”
A survey group of 18 lenders, representing over 68% of gross mortgage lending in 2015 and compromising of Tier 1 to Tier 3 lenders, provided IRESS with data for the last full 12 months of trading, approximating to the tax year period for 2015/16. Tier groups are based on the Council of Mortgage Lenders ‘largest mortgage lenders by gross lending’ 2015 table, and where required lenders’ own published figures.
IRESS analysed data provided by lenders as a whole and by type of lender, split by bank and mutual lenders and the three tier groups. Average figures have been provided to illustrate patterns across the mortgage market and lender types. Where possible data is rounded to the nearest percentage point.
Please note data provided by participants has not been independently verified.
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Mark Locke / Jenette Greenwood
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