"Now landlords are facing more hoops to jump through from multiple layers of regulation, and more highly-taxed incomes as their mortgage tax relief has been cutback."
The survey analysed the responses of 18 lenders, with a combined share of gross mortgage lending of 68% in 2015, equating to £152bn of loans.
Among the survey participants, the buy to let sector saw by far the largest year-on-year growth at 49%, while mortgages to first time buyers saw just a 0.7% increase and residential loans to home movers fell by 5.6%.
The intermediary channel continues to increase its share of the mortgage market, with 82% of sales now going through this channel, up from 78% in 2015 and 56% in 2014.
Almost three quarters (70%) of lenders experienced an increase in the number of applications submitted by brokers over the last year.
The direct channel continued to decline across branch and telephony, although sales via the internet increased, albeit from a low base. The internet channel remains a relatively small part of distribution, but as new digital entrants and brokers enter the market, IRESS says this channel could double in the next 18 to 24 months.
A further key finding was that the number of accepts has declined in all sales channels: with accepts in branch dropping by 20%, in consumer by 18%, in telephony by 15% and by 9% in the intermediary channel.
Additionally, the impact of MMR is still apparent, with average number of days to offer significantly higher than pre MMR levels, although there has been a slight improvement over last year.
Cases going to offer in 10 days or less were down 37% compared to pre Mortgage Market Review levels.
Lenders’ use of digital technology grew over the last year, with mobile quote and decision in principle increasing by 185%, case tracking by 72% and full mortgage application by 117%. More lenders are now providing direct and in-branch video links to mortgage advisers, offering more options to consumers and enabling more direct sales per adviser to be processed.
Henry Woodcock, Principal Mortgage Consultant, IRESS, said: “The most significant finding in the survey is the continued rise of the buy to let market. This sector has increased by more than 213% over the five years since the first IRESS Mortgage Efficiency Survey, but with the recent change of taxation around investment purchases for landlords, it seems unlikely that this stellar growth will continue. In the last year, loans to first time buyers have been fairly flat, suggesting that despite government incentives and innovative products offered by lenders, the struggle to get on the housing ladder remains a significant challenge.
“The survey also shows that two years on, MMR continues to impact the time taken to process mortgage cases. We believe that the average number of days to offer will only improve significantly when the valuation process is fully digitalised and developments in sharing of current account and credit data come to fruition to enable lenders to use automated income and expenditure verification.”
Peter Williams, executive director of IMLA, commented: “The survey research was undertaken a few months ago and the buy-to-let market has already tapered-off after the booming results reported here. The higher activity level recorded reflected the peak in activity as landlords rushed through purchases before the additional stamp duty charges were added in April. Now landlords are facing more hoops to jump through from multiple layers of regulation, and more highly-taxed incomes as their mortgage tax relief has been cutback. Recent industry data show BTL mortgage lending falling back significantly, with activity in July 49% below levels a year ago.
“The first-time buyer sector has also been struggling and the report shows sales have been stagnant. However, IMLA believes this may be a consequence of fewer FTB enquiries rather than waning lender support. Our latest Mortgage Market Tracker shows a higher proportion of FTB enquiries resulted in an agreement-in-principle in Q2 2016, at 57% up from 51% in Q1 2016. Those FTBs applying for a mortgage are seeing greater success.
“The consequences of the MMR regulations can also clearly be seen in the research. A larger share of the market now goes through intermediaries – which IMLA believes is a positive change, ensuring customers are advised on their options, given a greater variety of products and are now choosing from the whole of the market.
“Technology has transformed how we shop, bank and travel and now more complex transactions like applying for a mortgage are starting to reap the benefits of the digital revolution. More people are using their mobiles to research mortgages and to get quotes and decisions in principle, while others are using mobile to track their application. There is still a way to go to digitise the mortgage market – most mobile services are offered by less than half of lenders – but it is encouraging that many of the lenders surveyed are planning to roll out further digital innovations. It is almost inevitable that consumer and broker demands will run ahead of what lenders are doing but we can now see real progress coming through and the momentum is building up.”
