flexible mortgages

Brochure More information from http://www.researchandmarkets.com/reports/338024/ UK Flexible Mortgages 2006 Description: Flexibility is a popular concept in the UK. Today, most standard mortgages contain at least one element of flexibility and many believe that the flexibility concept will eventually become part of the standard mortgage offering. So, what factors are driving take-up of flexible mortgages? What will be the size of the flexible mortgage market in the next five years? This report provides the answers. Scope of this title: - Focuses on flexible mortgages in the UK. Current account and offset mortgages are excluded. - Sizes the flexible mortgage market in terms of gross advances and balances outstanding. - Looks at the typical characteristics of a flexible mortgagor. - Provides five-year forecasts based on three scenarios. Highlights of this title: Until 2004 the total mortgage market grew faster than the flexible mortgage market but was hit by the downturn in 2005. On the other hand, the flexible mortgage market has continued to grow steadily over 2005, thus, on the whole, growing at a quicker pace than the total mortgage market for the period 2002 to 2005. The fact that the proportion of flexible mortgage customers making use of their payment holiday is small stresses that they tend to view the possibility of taking a payment holiday (or underpay) as a safety measure. Data from the ODPMs Survey of English Housing (SEH) highlights that flexible mortgage holders tend to fall in higher income bands. 46.1 per cent of all flexible mortgagors had an annual household income of over £40,000 in 2004/2005 compared to 35.7 per cent for all mortgagors. Reasons to order your copy: - Gives you a competitive edge by providing you with a thorough analysis of the UK flexible mortgage market. - Learn how the competitive structure of the flexible mortgage market is changing. - Draw on our five-year scenario-based forecasts to plan your future strategy with confidence. Contents: Chapter 1 Introduction What is this report about? 11 Scope of the report 11 Defining flexible mortgages 11 Who is the target reader? 12 Structure of report 12 Chapter 2 The flexible mortgage market in context Introduction 13 Flexible mortgages explained 13 Flexibility is a popular concept in the UK 13 There is no set definition for flexible mortgages within the UK mortgage industry 15 Flexible mortgages have witnessed a growth in both balances outstanding and gross advances in 2005 16 New business advanced under flexible mortgages amounted to £84.5 billion in 2005 16 Market share of balances outstanding for flexible mortgages rose by 2.2 percentage points in 2005 18 Many factors have contributed to the popularity and expansion of flexible mortgages 19 A low base rate environment has played a role in boosting demand for flexible mortgages 20 Flexible mortgages allow borrowers the opportunity to clear their mortgage debt at an earlier stage 20 Flexible mortgages allow borrowers flexibility in their financial commitments 22 A flexible mortgage provides a safety net against short-term unexpected life events 22 Consumer awareness has increased as lenders focus on marketing the flexibility concept 24 But are there any issues linked with the growth of flexible mortgages? 26 Is there a danger of flexible mortgages contributing to the problem of overindebtedness? 26 Do lenders find it more difficult to manage credit risk and track arrears on flexible mortgages? 30 Do lenders face higher lending risks on flexible mortgages? 31 Conclusion 35 Chapter 3 The competitive landscape of the flexible mortgage market Introduction 36 A large number of lenders offer flexible mortgages 36 More than 50 lenders in the UK currently offer flexible mortgages 36 As flexibility has become more popular, niche lenders have also adapted their product portfolio accordingly 37 However, the level of flexibility offered by lenders differs 38 As the number of lenders of flexible mortgages have increased, prices have become more competitive 42 The price differential between a flexible and a non-flexible mortgage is now insignificant 43 Lenders of flexible mortgages follow similar marketing strategies 44 Expectedly, lenders’ marketing messages stress the freedom offered by flexibility 44 Creativity is relatively scarce in the flexible mortgage market 45 However, how long will flexibility continue to be a differentiated feature? 47 Flexibility features are also popular among intermediaries 47 Flexibility is highly valued by intermediaries 47 Conclusion 48 Chapter 4 Forecasting the flexible mortgage market Macroeconomic factors and factors specific to the flexible mortgage market are included in the forecasting model 50 Under ourView scenario, the flexible mortgage market will be worth £130.2 billion in gross advances in 2010 51 Under a pessimistic view, gross advances under flexible mortgages will fall in 2006 but will pick up slightly in 2007 52 Under an optimistic view, the flexible mortgage market will grow at a CAGR of 13.9 per cent over the next five years 54 Conclusion 56 Chapter 5 Appendix Supplementary data 59 Data tables relating to Chapter 2: The Flexible mortgage market in context 59 Data tables relating to Chapter 3: The competitive landscape of the flexible mortgage market 64 Data tables relating to Chapter 4: Forecasting the flexible mortgage market 65 Definitions 66 Sizing methodology 68 Gross advances 68 Balances outstanding 68 Forecasting methodology 68 Research methodology 69 Relevant readings 69 UK Mortgage Market Map 69 Reports 72 Future readings 74 Our custom research capabilities 74 Retail Banking Team contact details 75 How to contact experts in your industry List of Tables Table 1: Use of additional funds borrowed on flexible mortgages, 2005 30 Table 2: Rates applied on flexible mortgage products and traditional mortgage products for a sample of lenders, March 2006 43 Table 3: Flexible mortgage gross advances under the View scenario, 2005-2010f 52 Table 4: Flexible mortgage gross advances under the pessimistic scenario, 2005-2010f 54 Table 5: Flexible mortgage gross advances under the optimistic scenario, 2005-2010f 55 Table 6: Gross advances for flexible mortgages and the total UK mortgage market, 2002-2005 59 Table 7: Balances outstanding for the total mortgage market and for flexible mortgages, 2002-2005 60 Table 8: Advertising spend on flexible mortgages, 2001-2005 60 Table 9: Advertising spend on a sample of mortgage products, 2001-2005 60 Table 10: Proportion of flexible mortgage customers who have ever taken a payment holiday, 2002 -2005 61 Table 11: Proportion of flexible mortgage customers who have increased their mortgage borrowing since moving to their current property, 2002-2005 61 Table 12: Economic status of household reference person, 2004/2005 62 Table 13: Socio-economic classification of household reference person, 2004/2005 63 Table 14: Annual gross household income, 2004/2005 64 Table 15: Number of flexible mortgage lenders in the UK, 2000-2006 64 Table 16: Economic assumptions under our View scenario, 2005-2010f 65 Table 17: Economic assumptions under the pessimistic scenario, 2005-2010f 65 Table 18: Economic assumptions under the optimistic scenario, 2005-2010f List of Figures Figure 1: Gross advances for flexible mortgages amounted to £84.5 billion in 2005, 2002 to 2005 16 Figure 2: Gross advances for flexible mortgages have been increasing at a faster rate than gross advances for the total mortgage market, 2002-2005 18 Figure 3: Similar to the total mortgage market, balances outstanding for flexible mortgages have increased steadily over the years, 2002-2005 19 Figure 4: Flexible mortgages help to reduce the mortgage term by allowing overpayments, April 2006 21 Figure 5: The proportion of flexible mortgage customers making use of payment holiday feature remains small, 2002-2005 24 Figure 6: A significant amount of money was spent on advertising flexible mortgages in the early 2000s, 2001-2005 25 Figure 7: Lenders’ advertising focus has shifted to fixed rate mortgages in 2005, 2001-2005 26 Figure 8: A lesser proportion of flexible mortgage customers have increased their borrowing on their current mortgage in 2005, 2002-2005 29 Figure 9: A greater proportion of flexible mortgage customers are in full-time employment as opposed to the total mortgage market, 2004/2005 33 Figure 10: More than 60 per cent of flexible mortgagors are in a managerial / professional / supervisory position, 2004-2005 34 Figure 11: A higher proportion of flexible mortgagors falls under the annual household income band exceeding £50,000 than that of all mortgagors, 2004/2005 35 Figure 12: 49 per cent of mortgage lenders currently offer flexible mortgages , March 2006 37 Figure 13: The level of flexibility offered by lenders differs, March 2006 40 Figure 14: 11 of the 49 listed flexible mortgage lenders fall in the most flexible group, March 2006 42 Figure 15: Lenders’ marketing messages are focused on the advantages of flexible mortgages 45 Figure 16: Standard Life Bank’s Online Mortgage Shop www.freestylemortgages.com, May 2006 46 Figure 17: Flexibility is among the most important product features from the intermediary perspective, November 2004 48 Figure 18: Flexible mortgage gross advances will reach £131.2 billion in 2010 under the our View scenario, 2005 – 2010f 51 Figure 19: Under the pessimistic scenario, flexible mortgages will continue to increase its market share despite witnessing a fall in gross advances in 2006, 2005-2010f 53 Figure 20: Flexible mortgages will account for 50.2 per cent share of the mortgage market in 2010, 2005-2010f 55 Figure 21: The UK Mortgage Market Map covers a wide range of mortgage sectors 70 Figure 22: Mortgage sectors covered within the UK Mortgage Market Map 71 Figure 23: Our core consulting capabilities 75 Ordering: Order Online - http://www.researchandmarkets.com/reports/338024/ 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