Reportlinker Adds Direct Mortgages Market Report Plus.

NEW YORK, Jan. 27, 2011 /PRNewswire/ -- Reportlinker.com announces that a new market research report is available in its catalogue:

Direct Mortgages Market Report Plus

http://www.reportlinker.com/p0366583/Direct-Mortgages-Market-Report-Plus.html

Executive Summary

Direct lenders have suffered heavily during the financial crisis as liquidity was withdrawn. Many direct products were removed from the market almost overnight as borrowers sought the best remaining deals. They have taken much of the blame for the rise in deposit levels required for a loan and for the restrictions on eligibility.

The fall of the base rate to 0.5% in early 2009 demonstrated the unfairness of flexible mortgage rates and of competition in the mortgage market, since mortgage contracts ranged between 0.65% for some borrowers who took out tracker mortgages and over 7% for those who took out standard variable mortgages (SVM) or fixed-rate mortgages before mid-2008. This means that some mortgages carry a negative interest rate, since retail price index (RPI) inflation soared to 5.5% at one point in 2010.

At the same time, house prices have largely stagnated because funds are not available to most of those seeking a home. Yet the building of new homes has fallen to the level of construction in 1923. Consumers are faced with a squeeze on their housing wealth, higher taxes, lower real incomes and dramatically higher job insecurity.

Regulation by the Financial Services Authority (FSA) will have a significant effect on mortgage lending (assuming the reform of the regulatory regime will allow the implementation of Lord Turner's July 2010 proposals) and this may lead to a re-orientation of borrowers towards mortgage brokers and away from the direct lenders responsible for much of the mortgage mis-selling of the mid-2000s. Fraud by buy-to-let borrowers through irresponsible solicitors showed up the weaknesses of the previous regulatory regime.

The position of mortgage brokers in a confused, thin market is as strong as in a large and complex market. Their role, supported by new regulatory rules on mortgage lending, is more important when most people seeking a mortgage are concerned about the affordability of the loan and their personal financial risk.

Principles of clarity, transparency and products that fit the borrower's circumstances are prime aspects of new regulations. The provision of clear terms of business and comparable offers should make it possible for consumers to reduce the costs of their preferred product to a minimum (although, in the wake of the 'credit crunch', the costs of many mortgage products have risen, including large booking fees in some cases).

Some lenders have introduced new products that are only sold through intermediaries in order to capture more of the indirect market and to reassure themselves that much of the expensive fact-finding will be undertaken by the intermediary. Lenders are only interested in lending to high-quality borrowers, who are either long-term existing current account holders or who can pay a high percentage deposit. These cut the lender's loan-to-value (LTV) ratio and therefore support their capital strength.

Telephone-mediated mortgages experienced an increase in popularity during the late 1990s, however this channel has not expanded as much in recent years. Internet-mediated sales have not yet fulfilled the expectations of early innovators and are currently offered by only a small number of firms. However, sales through branches have held up in recent years. This may be related to the extensive process of applying for and processing mortgages and to the variety of products that may confuse the applicant.

Key Note concludes that the future of mortgage provision lies with prudent lenders that offer flexible mortgage products to small market segments, using innovative products to minimise risk and to maximise affordability. In such a market, small providers, such as building societies, should perform well and mortgage brokers, rather than large direct providers, will be the most popular channel of delivery.

To order this report:

: Direct Mortgages Market Report Plus

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Nicolas Bombourg

Reportlinker

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