If the next 10 years in the mortgage market are anything like the past decade, much will change beyond recognition. Since 2010 we have seen the UK’s recovery from the credit crunch, the end of self-certification loans, the tightening-up of affordability tests through the Mortgage Market Review, a clampdown on interest-only lending and a multi-pronged attack on buy-to-let landlords. We asked experts across the sector to give us their predictions for what the housing and mortgage markets would look like in the year 2030.
Our national obsession with house prices looks unlikely to fade, but some believe the era of property market speculation is coming to an end as growth settles back to a lower level than that seen in recent decades.
According to Nationwide Building Society figures, prices rose by 33 per cent over the past 10 years, compared to 117 per cent over the 2000s, 21 per cent over the 90s and 180 per cent over the 80s.
Many experts think house prices and rents are only likely to rise in line with wage growth at best over the next decade.
Zoopla research and insight director Richard Donnell says: “Over the past 20 or 30 years we have had lower andlower mortgage rates that have boosted the buying power of households, and that has fed in to decent levels of real house price growth.
“Mortgage rates are at record lows and I don’t think anyone believes they will go any lower. Really we are in a position where house prices are going to be a function of earnings growth.”
Donnell says that, in some parts of the country such as major cities in the Midlands and the North and anywhere with a strong labour market, growth may be higher. If prices were to rise in line with wages, that could mean annual increases of around 2.5 per cent, which over 10 years would make total growth of around 28 per cent. At that rate, the UK average would increase from £251,000 to around £321,000, according to the latest Office for National Statistics data.
Reallymoving chief executive Rob Houghton also believes house prices will track wage growth in the next 10 years.
“Over the past decade, wage inflation has been in the 1-4 per cent range, so we would expect a 10-year average of 2-3 per cent, or a 22–34 per cent rise over the period,” he says.
London School of Economics emeritus professor of housing economics Christine Whitehead says that in the short term house prices appear to be picking up rapidly, but they may not even keep up with inflation over the longer term.
She adds: “I would not expect significant house price rises except in areas of population tension but, on the whole, the government does not like house prices falling, so it will probably do something about it.”
Property Checklist managing director Kate Faulkner agrees that future house price growth looks set to be much more muted than we have seen in some decades.
She says: “Many people are still hanging on to the view that property is a good investment and prices double every 10 years. In many places property prices have been struggling to keep up with inflation. Considering over 50 per cent of people own outright, this means they are effectively losing money on property without realising it. In the Northeast, prices are still 7 per cent lower than 12 years ago – in Northern Ireland they are down by 38 per cent. Their bubble has burst.
“I expect prices to rise in line with wages over the coming years, which will change people’s attitude to property being a money-maker and reduce the amateur investment we have seen from buy-to-let landlords who own just a single rental property.”
Complete digital conveyancing
Improvements in the buying and selling process are long overdue, but experts predict that significant change is finally on the horizon. The Council for Licensed Conveyancers has forecast that by 2030 the conveyancing process will be fully digital.
Conveyancing Association former chair and executive member Eddie Goldsmith agrees, but believes it will happen even sooner. He says: “I’m convinced that by 2025 we will have a fully digital end-to-end conveyancing process. That means a conveyancer will sit at their desktop and clients will be able to sign documentation electronically. They will be able to download everything instantaneously from the Land Registry.
“When that happens, there is another potential revolution because it empowers clients. It is not beyond the bounds of potential that clients could effectively control and manage their own conveyancing through a smartphone, just as you can already do with your online banking, insurance and share dealings.”
Goldsmith says conveyancers spend a huge amount of their time chasing documents, searches, lenders and the other side’s solicitors. He expects consumers in future to have more visibility of where they are in the process and who needs to do what next, via an online portal that stores all their documents. Buyers and sellers will then be able to do much of the chasing themselves.
“Clients’ satisfaction levels will rise considerably because they will be in charge and if you are doing it yourself you have nobody else to blame,” he says.
But Goldsmith also predicts a substantial contraction in the conveyancing sector.
“Probably only 25 per cent of the conveyancers that are around at the moment will still be in business in 2030,” he says.
He can also see the potential for further disruption from tech giants that are not currently playing in the sector.
“We could see Uber conveyancing, or Amazon lending. The market is worth billions of pounds and, in any market that is worth that much money and with the kind of rich data that homebuyers generate, companies will be looking at how they can take a slice of it.”
The drive to provide homebuyers with upfront information about a property is firmly on the agenda again. The failed Home Information Pack initiative set out to achieve this, but was scrapped after only three years because it was seen as costly and burdensome for sellers, without enough detail to be significantly beneficial to buyers.
However, the digitisation of records could make it cheaper and easier to provide searches, building certificates, title and lease documents as soon as a property goes on the market, so that prospective buyers can make a much more educated decision about whether to make an offer and at what price.
Faulkner chairs the cross-industry Home Buying and Selling Group, which is looking at how this documentation could be supplied upfront in the form of a ‘buying and selling property information’ file.
Home file accessible to all
Faulkner predicts: “There will be a file on every home and most of this will be available to buyers from the start of their search – as I hope surveys will be too. When an offer is made, all the latest information will be collated at the start and then opened up to the surveyor, solicitor and lender, so that they can give their advice in an informed way and reduce questions post acceptance of the offer.
“I expect gazumping and fall-throughs to be a thing of the past – in the main.”
The government is carrying out further research into the HBSG’s reservation agreement proposals with a view to carrying out a pilot in the near future. Despite these changes, Faulkner does not believe the time it takes to move home will get significantly quicker.
“It is a myth that people can throw their whole lives in the air, find somewhere new and move in. For that to happen in less than six weeks is difficult for anyone to get their head around.”
Faulkner would also like to see firms offering a homebuyer advisory service.
She says: “Overall, my hope is that the whole property sector will be more transparent, better organised and work around the consumer. It needs to offer specific services for first-time buyers, investors and people trading up or trading down. It needs specialists who understand each person’s individual needs.”
Integra Property Services managing director Michael Day agrees that the estate agency model needs to shift. Day, who has worked in the sector for more than 40 years and is now a consultant, says that political pressure will demand that agents have a minimum level of qualifications. The number of agencies will shrink, but standards will be higher and costs will inevitably rise, he predicts.
“We will be left with better-quality and better-qualified people who are able to provide much more of a consultancy service supported by great marketing and technology.”
Agents also face the threat of a ban on referral fees, as the government has already indicated that unless firms comply with disclosure requirements they may be outlawed altogether.
Meanwhile, dynamic risk-based pricing is coming to the mortgage market, according to digital broker Burrow’s founder Pradeep Raman. He is now director of digital solutions at technology provider DPR, which acquired his firm in 2018.
Real-time credit scores
Raman believes the opening-up of data will enable lenders to get real-time credit scores and other pertinent information about the customer. This will lead to much more personalisation of both products and pricing.
He says: “Currently you have a market where lenders are looking at different segments of demand and different segments of risk within that, and then they create buckets of products. No bucket of products is perfect for any given customer because it is a broad-brush approach.
“Exactly the same thing is going on with risk appetite, because you don’t have perfect information about a customer. You are putting a whole bunch of people who represent different levels of risk into the same category and giving all of them the same rate.”
But Raman says more accurate and easily accessible data on individuals will change this model.
“Once you have open data, that leads to dynamic pricing and product creation. Lenders can set up product rules and product builders that can consume all the available information from sources like Open Banking and credit files. Then on the basis of that data they can create bespoke personalised products that are just right for that customer on the fly,” he says.
Raman predicts lenders will offer ‘always on’ mortgage products that constantly scan for data about the customer and switch them to the best rate according to their evolving circumstances with no early repayment charges.
BearingPoint management consultant Panagiota Kovani agrees that long-term, dynamic and bespoke products will become the norm.
“As the credit and income profile of the borrower changes, the offering will adapt accordingly,” she says. “So throughout the lifetime of the mortgage it will be flexible and adjust along the journey that the borrower goes through.”
Kovani says many lenders are close to making fully digital both the front-end mortgage application process and the majority of behind-the-scenes underwriting decisions.
WhenFresh co-founder and co-director Mark Cunningham says this will support an emerging business model, whereby consumer-facing digital lenders tap in directly to wholesale markets to secure mortgage funding as applications come in, without the need to hold vast amounts of capital or retail deposits. He points to new digital lender M:QUBE as an example.
“With increased direct access to capital markets, you no longer need to go through an intermediary such as a bank.”
