Mortgage market troubles to continue in 2009

The Association of Mortgage Intermediaries (AMI) has published its research paper ‘The Credit Crunch - One Year On.

Adapting to a Changing Mortgage Market'. The paper sets out its view for the future of the mortgage and housing markets and the outlook for mortgage intermediaries. The paper predicts that net lending for 2008 will be around £55bn - half the 2007 level - and is not likely to increase in 2009.

The effect on intermediary business means average incomes are set to fall 40% in 2008 and stay flat in 2009 before beginning to recover. The impact on the industry will cause firm closures and redundancies. The big, efficient networks and small firms with tight customer relationships are best placed to survive while medium sized firms that have relied on the purchase of mortgage leads are most likely to be affected. The key to surviving the slowdown is through income diversification, relationship management, and cost control. The AMI is currently running a series of workshops across the UK to help intermediaries adapt to the changing landscape.

Chris Cummings, Director General of the AMI, said: "The impact of the credit crunch is likely to be felt much longer and deeper than was expected 12 months ago. And despite the intervention of the US Government the housing and mortgage markets are not likely to recover in the short term.

"Sir James Crosby predicted a bleak future for the industry up to 2011 in his interim report on the mortgage finance market. What we now need to see in his final report is a clear set of actions for the UK Government. The US has set the bar in terms of the level of intervention required. We need to see the UK follow this lead."

Chris added: "We do expect to see a drop in the number of mortgage intermediary firms. However, it is not all doom and gloom. Lenders will want a more balanced portfolio approach with a spread of geographical risk, property sectors, and borrower types. This presents an opportunity for mortgage brokers. With more borrowers finding their access to finance restricted, they will need the advice a broker can provide. Although we would expect the current very high levels of intermediary usage to drop, we expect the use of brokers to settle at a higher level than the long run average as a result of these changes. A customer-focused, advice-driven business model, rather than a volume machine is likely to serve firms well.

"We will see a smaller, leaner industry but the remaining firms will have the best staff and will be stronger and better diversified. Diversification will be key. Last September, 71% of larger firms had activities beyond mortgage broking alone. By March, 85% did. We want to assist firms to make the necessary changes to survive in the new look market place."