Mark Lofthouse, CEO of Mortgage Brain, explains how the firm’s product data analysis helps lenders and advisers understand market trends
For several years, Mortgage Brain has been producing a detailed analysis of mortgage products covering many aspects of the UK mortgage market. This sophisticated analysis readily identifies mortgage market trends but can also be tailored to understand competitiveness in market areas and against peers.
The analysis is not only by market area – residential or buy-to-let – but also looks at many and varied criteria, including property value and loan-to-value ratios etc. Complementing this is a breakdown of the number of products in the market – both as a total number and broken down by different loan-to-value (LTVs) and product type.
The analysis can be broken down into three distinct areas: identifying market trends; product competitiveness; and the number and breakdown of products.
Detailed monthly product data analysis to identify both long and short-term trends is the core of what we produce. Typically this covers two, three and five-year fixed and tracker products at 60%, 70%, 80% and 90% loan-to-value ratios in the purchase market, and two, three and five-year fixed and tracker products for buy-to-let.
These figures offer two important benefits to lenders and advisers. Over a long time period, they can be used to help identify trends, enabling lenders to adjust their product’s rates and features to suit the market at that time. Advisers, meanwhile, can use the data to gauge the direction of the market and better advise clients on the most suitable products and product types and potential tie-in periods.
The month-by-month analysis enables everyone to get a snapshot of the current state of the market and identify short and long-term trends and anomalies. This can help lenders to identify and fill any gaps in the market, and allows advisers to offer real-time advice and potential opportunities for their mortgage or remortgage activity.
There is another, hugely important benefit in that product breakdown is based on the true cost of a mortgage and separately the initial headline rate. Digging in to the results clearly shows that products with a low, eye catching initial rate are generally more expensive over a period of time.
What’s in a number – a five-year review?
The overriding trend, perhaps unsurprisingly, over the past five years is a big reduction in the cost of mortgages across the board. The market has seen a number of steady rate and cost reductions over the past 12 to 24 months, flirting with a few cost increases in places, but there is a marked double digit reduction in the cost of most mainstream products now compared to Spring 2013.
The cost of an 80% LTV two-year fixed, and a 60% and 80% LTV two-year tracker, for example, has come down by 15% over the last five years. It’s a similar story for borrowers who favour long-terms deals with a 14% reduction in cost being seen for an 80% LTV five-year fixed purchase mortgage, while its 60% LTV counterpart is now 9% cheaper than it was in 2013 (see graphs 1 and 2).
Despite going through several periods of change and uncertainty over the past year or so, the buy-to-let market has seen the most substantial year-on-year cost reductions over…