IFAonline TV: Just what is the future of mortgages?

A drop in the number of houses on the market and a rise in the use of offset and lifetime mortgages are some of the developments speakers on IFAonline TV expect to see in the near future.

Speaking on the latest edition of IFAonline.tv – entitled the Great Homeowner Debate – Nick Baxter, managing director of Mortgage Promotions, raises concerns the cost of home information packs (Hips) will lead to only very serious sellers putting their properties on the market.

As a result, he believes the number of houses on the market will decline and suggests the ensuing supply shortage will lead to further increases in house prices.

Likewise, Ray Boulger, senior technical manager at Charcol, believes Hips will make the selling of houses slower as consumers will have to wait two weeks to put their property on the market and much longer to put a selling chain together.

In addition, he predicts lenders will further develop offset mortgages and realise the importance of offering fixed rates.

He states: “I see the offset as the ideal market for lifetime mortgages because consumers need the flexibility to draw down money when they need it.”

Boulger suggests there will be an increase in shared ownership from first-time buyers (FTBs) into the wider homeowner market if the industry comes up with a cost-effective solution, perhaps with insurance backing, but may also be adopted by the wider homeowner community.

“Consumers may find owning 75% of a larger property is better for them than owning 100% of a smaller property,” he adds.

Similarly, he suggests real estate investment trusts (Reits) might be a way of financing shard ownership deals, but further work might be needed to assess the management of government proposed Reits.

Underpinning their predictions for the future, IFAonline.tv speakers raise concerns about affordability and suggest increasing levels of debt will have a detrimental effect on the market.

Harry Katz, principal at Norwest Consultants, believes debt will continue to rise as pay awards fail to keep up with increasing council taxes and utility bills.

Likewise, Simon Tyler, managing director of Chase de Vere Mortgages, states: “People’s attitude to debt has changed – it is a continual part of their lives. Mortgages used to be for 25 year terms but now people expect to have them for whole of life and into the next generation. It's part of the everything now economy we live in, and the market has adapted to reflect that.”

But Jonathan Cornell, technical director at Hampton’s International Mortgages, thinks the market will adapt to help consumers cope with affordability problems.

He believes there will be continued product innovation from lenders in the future to help people borrow the amount they need.

He adds: “Once the red tape issue around regulation has finished we will see more product innovation. It has been hampered by certain aspects of disclosure.”

On the supply side, Paul White, IFA at Belgravia Insurance Consultants, predicts a re-emergence of high-rise flats as a result of space restriction, which he says is exacerbated by around 300,000 people arriving in the UK from new countries in the EU over the last two years.

He states: “This will feedback to lenders’ traditional reluctance to lend on properties over six or seven blocks high.”

If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email emily.perryman@incisivemedia.com.