The key statistics are as follows:
Mortgage contracts
- Mortgage sales between 1 April 2010 and 31 March 2011 reached their lowest level since the FSA began recording data in Q2 2005. Overall, mortgage sales declined by 7% from 2009/10 to 2010/11;
- Of all the lenders that reported mortgage sales using PSD, the top five accounted for about 62% of all sales by volume, the top 10 for 83% and the top 20 for 94%. These figures reflect the trend towards increased firm concentration as a result of mergers and acquisitions in recent years;
- Looking at sales by type of provider firms, large banking institutions account for a substantial 83% of the market, followed by building societies and credit unions (8.6%). The remainder is accounted for by non-deposit takers, overseas banks and small provider firms;
- Sales of mortgages to first-time buyers, remortgagers and home movers all fell in 2010/11 compared to 2009/10;
- Although still the most popular type, the proportion of new fixed interest rate mortgages declined significantly from 63% in 2009/10 to 53% in 2010/11. Initial rates on fixed interest rate mortgages have been consistently higher than variable rates but the gap is shrinking;
- The proportion of interest-only mortgages with an unknown repayment vehicle has continued to decline from 13.5% in Q2 2010 to 10.8% in Q1 2011; and
- The average age of first-time buyers has shown a mild but steady increase since Q2 2005.
Retail investment products
- Aggregate sales of retail products in 2010/11 declined 0.6% from 2009/10, with marked variation across product types: most accumulation pension products saw substantial expansions, whilst Structured Capital at Risk Products (SCARPs), Endowments and decumulation pension products (Income Drawdown products and Annuities) contracted;
- Pension products represent the majority of retail investment products (55%);
- The number of selling firms in the market for retail products is significantly more volatile than the number of provider firms and seems to be affected by market conditions;
- Low interest rates have made fixed-income products relatively unattractive. This may have persuaded investors to enter into comparatively higher risk equity investments;
- The FSA suspects that the growth in sales observed for the majority of accumulation pension products (Occupational, Group Personal & Personal Pension products and SIPPs) does not represent an increase in savings coming from new money but rather shifts between different providers and products;
- The combination of high unemployment, declining real household incomes and economic uncertainty has undermined people’s ability – or willingness – to focus on longer-term savings goals. Precautionary savings have taken precedence;
- The proportion of retail products sold with advice declined by two percentage points from 2009/10 to 2010/11 to 66%; and
- In 2010/11, there was a decline in both the proportion of advised sales and the proportion of sales with single payments.
Pure protection products
- Sales of pure protection products fell slightly – by 1% – in 2010/11 compared to 2009/10, driven by Income Protection and Standalone Critical Illness products (which declined by 7.7% and 25.6% respectively). In contrast, Sales of Critical Illness Sold as a Rider Benefit expanded by 2.8%;
- The decline in mortgage sales has hit both sellers and providers of pure protection contracts. The trend has been towards a higher market concentration;
- In all three markets for pure protection contracts, the market share of the five largest provider firms exceeds 60%. The concentration is highest in the Standalone Critical Illness market, which is the smallest market in terms of sales and also has the lowest number of providers;
- Banks and Building Societies also gained substantial market share as providers, to the detriment of insurance companies; and
- 89% of pure protection contracts in 2010/11 were sold through non-provider firms acting as intermediaries. This proportion has increased from 86% in 2009/10, mostly driven by Income Protection products.
