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Back in time

2012 has been a far from dull year for the mortgage market, with a look back at events in the last 12 months showing a mixture of positives and negatives

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While 2012 has sadly not seen the UK mortgage market finally get back on its feet and show healthy growth again, this year certainly hasn’t been a dull one.

Positive news for 2012 has been the Government launched the Funding for Lending Scheme and NewBuy.

It’s still early days for both of these schemes but they have both been a rare bright spot in an otherwise uninspiring lending environment.

The big news for this year has been that after three years of consultation the FSA came out with its final rules for the Mortgage Market Review.

On the whole the intermediary sector’s response to the final rules has been a positive one. While the regulator has now permanently embedded a more conservative market, it has also put a value on the provision of advice with its restriction on non-advised sales.

Interest-only is not dead, with the MMR final rules allowing it providing there is a credible repayment strategy. But with a large chunk of lenders slashing their SVRs below 75 per cent and mainstream lenders like Nationwide, NatWest, Co-operative Bank and Coventry pulling out of interest-only completely in 2012, this is a product returning to its roots as a niche product.

This was also the year when payday lending hit the news, with the government finally taking action by capping the cost of credit for payday lenders.

It seems 2012 has been a year of debate, once again sparking questions over the future of the mortgage industry.

So in this week’s cover feature we dress up like Father Time and take you through some of the highlights of this year’s Mortgage Strategy.

January 2012

January wasn’t the best start to the year, with the inevitable negative results from 2011 rearing their ugly head.

The Bank of England reveals a 2.5 per cent drop in mortgage approvals in November 2011, sparking fears of what is to come in the next 12 months. To add to the blow, Barclays reveals mortgage repayments are at their lowest in 10 years at only 15.2 per cent of take-home pay, or £488 a month.

The Mortgage Market Review hit the news with the final consultation paper showing that although lenders would be able to waive affordability rules to help those unable to remortgage or move house because of strict criteria, the borrowers must not have had any arrears in the last 12 months, leaving a third of sub-prime borrowers without help.

On a more positive note, direct-only lender HSBC announces it is to lend at least £15bn in mortgages in 2012 and the CML reveals gross mortgage lending in December 2011 is 12 per cent higher than the previous year – a sign that mortgage lending could be on the rise.

In other news, PMS chairman John Malone announces he has extended his contract with the company until December 2013. He tells Mortgage Strategy: “By 2013 hopefully we will be through the worst of the recession and I can pass on the business to my colleagues with a bit more light showing at the end of the tunnel.”

February 2012

After Mortgage Strategy reveals Paymentshield had informed a number of brokers it would be slashing commission to 5 per cent in November 2011, one broker decides to take legal action against the company, alleging that the decision to cut the commission is a breach of contract.

Santander shocks the mortgage sector by deciding to cap interest-only lending at 50 per cent LTV and will take a zero-tolerance approach to any adverse credit history from borrowers, sparking fears that other lenders would follow suit.

Lloyds reveals it is to cut 1,000 jobs as a part of ongoing measures to make annual savings of £1.5bn by 2014.

The FSA reveals banks paid out £1.9bn in Payment Protection Insurance last year, with £441m in December alone. Which? warns banks they have been too slow in settling the claims with customers.

Masthaven Bridging Finance breaks in to the secured lending market by offering loans of between £5,000 and £100,000, fuelling rumours that other bridging lenders would do the same throughout 2012. Could we start to see a rise in secured lending?

On the back of this, Precise Mortgages announces it is to leave the Association of Short-term Lenders, claiming there are too many trade bodies representing the bridging sector.

Mortgage Strategy features an exclusive interview with British Bankers Association chief executive Angela Knight in which she talks about challenging the FSA in the High Court of Justice over the mis-selling of payment protection insurance and how companies should compensate victims. Knight would step down from her post later in the year.

Lord Robert May appears in our Lending Strategy supplement, giving us an insight in to the global banking system. “There are no easy answers,” he says. “I am good at understanding what is going on but often when you realise what is happening it is really hard to fix it.”

March 2012

The government launches the NewBuy scheme in which lenders offer 95 per cent LTV on new-build properties against a mortgage indemnity guarantee funded jointly by builders and the government up to 9 per cent of the property value.

Mortgage complaints rose by 38 per cent in the second half of 2011 according to data from the Financial Ombudsman Service. This sparks the suggestion that claim firms are targeting interest-only borrowers, leading to the hike in complaints.

Interest-only takes another hit as the FSA say lenders are sitting on an interest-only time-bomb. It claims there is nothing it can do to help the large number of borrowers in their late 50s who have no repayment plan in place for their interest-only mortgage. The FSA also hint it may start introducing aspects of the MMR earlier than 2013.

There are some positive signs in the mortgage market, with figures from the Council of Mortgage Lenders showing that lending in February has risen 14 per cent year-on-year.

Networks are on high alert after fraudsters attempt to scam them out of brokers’ proc fee payments. The Fraudsters tried to transfer the payments directly to themselves rather than the networks’ usual account.

In this months Lending Strategy, a round table debate is held discussing the general state of the housing market, regulation and interest-only. Lloyds mortgage sales director Mike Jones says Lloyds has treated interest-only as a niche product in the way it sees it for the future and Europe director of sales and marketing Michael Bolton claims interest-only will turn out as toxic as self-cert.

April 2012

The UK is back in recession after a 0.2 per cent drop in GDP according to the Office of National Statistics. Signs appear that mortgage lending may slump after figures from the Bank of England show lending fell 12 per cent in February.

Nationwide and Lloyds announce they are cutting proc fees by 0.02 per cent and in a cover feature analysing proc fees, we look at how it is likely more lenders will follow suit now some have started the process. BM Solutions announce it will pay 0.02 per cent less and Lloyds TSB Scotland and Scottish Widows say they will change commission structures.

BBA chief executive Angela Knight announces she is to step down in the summer after five years in the position. She says: “I have been at the BBA at a time of extraordinary difficulty and during a crisis of a magnitude that few, if any, have seen before or expected.”

Masthaven are hit by scamsters who attempts to con the bridging lender out of £1.5bn by posing as wealthy Arab brothers using fake passports and forged documents. They were jailed for 12 and a half years.

The secured lending market shows signs of stability as figures from the Finance and Leasing Association show a rise of 24 per cent in February. However, this is attributed to mortgage lenders tightening their criteria.

A Mortgage Strategy investigation reveals that a number of firms are still offering sale-and-rent-back services despite the FSA announcing the market was temporarily shut less than three months before due to the selling of unsuitable and unaffordable schemes.

European Mortgage Federation director-general Annik Lambert talks to us about her plans for lenders in the European Mortgage Directive : “We believe there isn’t a case for the directive because while mortgage lending was the cause of the crisis in the US, it has not been here.”

May 2012

The interest-only market is still looking nervous after the Co-operative Bank axes its interest-only mortgage, blaming lack of demand and the MMR for its decision. Other lenders are expected to follow suit despite the FSA saying it does not intend to ban interest-only. The FSA later reveals that some lenders have asked for it to ban interest-only mortgages as a part of the MMR but responded by stating they believe interest-only is right for some borrowers.

Abbey for Intermediaries notifies around 140 advisers it will no longer be able to use its fast-track facility after a review of its business performance, sparking rumours that Abbey removed these advisers from the service because they had failed to provide evidence of clients’ incomes. Soon after, more than 100 brokers opted out of using this facility.

There is some positive news on the mortgage horizon as Nationwide announces its gross lending rose by 44 per cent in the 12 months leading to April and helped 9 per cent more first-time buyers year-on-year.

In Mortgage Strategy’s cover feature on the new build sector, we investigate how the government is planning to fix the sector and move it forward. Home Builder Federation head Steve Turner says of the NewBuy scheme: “It will undoubtedly be a success as we’ve always said it would be.”

Figures from the Home Builder Federation show that 400 properties have been reserved throughout the NewBuy scheme since it began in March and Santander announce it is to join the scheme and offer a free standard mortgage valuation.

June 2012

Mortgage Strategy launches the Bringing Down FSA Fees Campaign, asking readers to write in with the aim of launching a petition against the FSAs proposal to hike its annual fees to mortgage brokers, which is forecast to rise by 9.2 per cent after the announcement in the 2012/2013 budget.

The FSA official report for 2011/2012 shows that Financial Conduct Authority designate Martin Wheatley has received £50,000 in bonuses since joining the FSA in September 2011.

Mortgage Strategy submits a Freedom of Information request which reveals the FSA spent £4.5m recruiting staff in the last 12 months. As a result, the figure reveals the high number of staff leaving the business, with 430 permanent employees quitting throughout 2011.

M&S announce it is to start offering mortgages through new venture, M&S Bank.

Housing minister Grant Shapps is accused of making false claims about the state of the housing market by shadow housing minister Jack Dromey. Dromey accuses Shapps of misrepresentation and misuse of official housing and homelessness data. Shapps dismissed Dromey’s claims as an “incomprehensible rant”.

The Ministry of Justice warns claims management firms that action will be taken against them if they do not deal with complaints correctly and is in the process of issuing official warnings to the worst offenders.

July 2012

James Hilton, previously head of mortgages of the Co-operative Bank, takes over as director of Platform following David Tweedy’s departure in May. This appointment signifies a big change within Platform. In February 2011, 80 staff were under consultation at the business and its Canary Wharf office was closed.

The are some positive signs in the mortgage market as the Building Societies Association reveals gross lending has risen by 40 per cent in the first five months of 2012 compared to the same period in 2011. The CML’s lending figures for May also reveals that house purchase loans have risen by 24 per cent over the course of the year.

Complaints against mortgage brokers rose 233 per cent within the last year according to the Financial Services Compensation Schemes’ annual report, with only one in 20 being upheld. A third of these complaints came from claims management firms while two-thirds came from individuals.

It is revealed that taking out a short-term payday loan could disqualify an applicant from obtaining a mortgage. Mortgage lender GE Money says it will not consider applicants who have taken out a payday loan over the last three months. As a result of this, Labour MP Stella Creasy condemns the governments refusal to act on payday loans as “unforgivable”.

August 2012

The government launches the Funding for Lending scheme. It is thought the scheme will provide a massive boost to the housing market, and will make it easier for first-time buyers to get on the property ladder.

Tesco Bank breaks in to the mortgage market, offering two, three or five year fixed rate mortgages and a two year tracker up to a maximum LTV of 80 per cent. The Post Office also announces it is to start offering mortgages in its branches in a bid to rival high street lenders.

There is good news for first-time buyers as Lloyds sets aside £5bn to help first-time buyers get on to the property ladder by the end of the year. Saffron Building Society also relaunches its 95 per cent mortgage for first-time buyers who have been renting for more than 12 months.

Building societies appear to be having a good year so far, as Skipton Building Society reports a £22.3m pre-tax profit in the first six months of this year, partly due to the increase in the pre-tax profit of £3.9m in the mortgage and savings devisions compared to a loss of £8.1m during the same period of 2011. Coventry Building Society also increases its gross lending by 33 per cent year-on-year in the first half of 2012.

Barclays announces it is to appoint Sir David Walker as chairman at the beginning of November, replacing Marcus Agius. This is a big move for the bank after the Libor scandal, which saw Barclays fined more that £290m by UK and US regulators in June after manipulating Libor rates.

The MOJ sets up a specialist unit to investigate claims management firms who target payment protection insurance misselling claims. The MOJ will work closely with the FSA, the Financial Services Compensation Scheme and the FOS in the crackdown.

Stonebridge Group managing director Richard Adams appears in one of our cover features talking about how he intends to make Stonebridge a bigger and better business. Adams says: “It’s fair to say that with our size and buying power it’s easy to make a deal if the margins are there, so you should be seeing a few more deals from us before the end of the year.”

September 2012

Figures from the Building Societies Association support the success of last month after announcing that gross lending from building societies increased by 44 per cent year-on-year in July.

Mortgages for first-time buyers rose by 53 per cent in the £120,000 to £250,000 price band between Q2 of 2011 and Q1 of 2012 according to figures from the FSA. Fixed-term mortgages are most popular accounting for 62.5 per cent of sales.

Mortgage Strategy reveals that Precise Mortgages are to enter the prime residential market for the first time with rates to challenge high street lenders. These mortgages will only be available to borrowers in the South initially. Precise will be offering two-year fixed rate products which start at 3.49 per cent with 70 per cent LTV.

Bridging lender Tuita Plc and one of its primary funders Connaught Asset Management enter administration. Mortgage strategy reported the previous month that Tuita made a pre-tax loss of £37.8m in the 18 months to September 2011.

Barclays hatches an aggressive campaign to win clients after other lenders hike their SVRs. It cuts its two-year fixed Great Escape remortgage product by 0.25 per cent to 3.49 per cent with up to 70 per cent LTV.

Financial Conduct Authority chief executive designate Martin Wheatley says that claims management companies are a “cancer on the industry”. Speaking at the Association of British Insurers Conference, Wheatley says the FSA have failed to pay proportionate fines for the misselling of payment protection insurance and the banks’ aggressive approach to PPI sales have led to the growth of the claims management sector.

October 2012

Providers announce their gender specific plans after it was announced in March 2011 by the European Court of Justice that providers will be unable to price products based on gender from 21 December 2012. Ageas Protect, LV=, Legal & General and Bright Grey and Scottish Provident have announced their plans so far.

The final rules of the MMR are published, with the FSA officially dropping its previous requirement that affordability should be assessed on a maximum 25 year term. The FSA says: “Respondents felt this was too restrictive and in particular would prevent younger customers from getting on the property ladder.”

The government announces it is to regulate payday loans unless the industry itself creates a system of self-regulation. Lord Dick Newby says “If they can do it quickly then that is fine but if they don’t then something will have to be done.”

The future of interest-only loans is questionable after two more providers took steps to limits their offerings. Nationwide announces it will stop providing interest-only mortgages completely and the Royal Bank of Scotland announces it will no longer accept non-advised interest-only mortgages.

After ING Direct UK announces it is to leave the Uk banking sector in August, Barclays buys its £10.9bn deposit book and £5.6bn mortgage book . The deal, which is expected to be completed in the second quarter of 2013, will result in around 750 ING Direct employees and 1.5 million customers transferring to Barclays.

The FSA fines the Bank of Scotland £4.2m after system failures which resulted in the bank holding inaccurate mortgage records for 250,000 of its customers.

November 2012

Another 17 lenders sign up to the Funding for Lending Scheme in the past month, taking the total number of participants to 30 so far – a positive move for the economy. Gross mortgage lending is predicted to hit £144bn for 2012 because of the FLS but the Mortgage Advice Bureau’s head of lending Brian Murphy says there needs to be more participants for the FLS to be successful.

The Council of Mortgage Lenders chairman Martin Van Der Heijden hits out at “hidden procuration fees” at the CML’s annual conference, saying they distort consumer choice. This sparks outrage among brokers, who took the comment as a personal insult to the way they do their business with their clients. The Association of Mortgage Intermediaries chief executive Robert Sinclair also hit back at these remarks, saying he thought it was strange that somebody could be making these comments on a public stage and “not getting his a*** sued”.

We feature an exclusive interview with PMS executive chairman John Malone who talks to us about being in the finance industry for fifty years. He tells Mortgage Strategy: “I think people would say I am difficult to manage. But I bring an enormous amount of experience, knowledge and respect to the business.”

Investigation into the payday lending sector kicks off as an interim report reveals the Office of Fair Trading will write to all 240 active payday lenders regarding aggressive debt collection practices. The OFT believes payday lenders are not checking that the loans are affordable to consumers and is concerned about how the lenders deal with borrowers who are getting in to financial difficulties because of these loans.

The government faced defeat in the House of Lords, after caving in to Labour demands to cap the cost of credit for payday lenders. The government will amend the Financial Services Bill, which will give the Financial Conduct Authority power to cap the cost and duration of credit for short-term loans.

2013?

And with December still to play out that’s it for 2012 – so what will 2013 bring? With many within the industry predicting that the FLS will finally kick start lending next year confidence is mounting. Could we see another £10bn worth of lending? Will the FSA’s name change in April to the Financial Conduct Authority be purely cosmetic? Will we see wide ranging changes as Canadian Mark Carney takes over from Sir Mervyn King as governor of the Bank of England? Fingers crossed it’s a case of one-step forward rather than three-steps back.

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