At the crossroads for home ownership

It’s official, we’ve re-entered a recession albeit a technical one as announced by the Office for National Statistics this month.

As I predicted last month, we saw the best of 2012 in Q1. More important than the figures themselves is their impact on consumer confidence. If consumers can’t access credit, does it matter how confident they are?

Mortgage lending is getting tougher – our 680 mortgage consultants agree that getting mortgages approved has become a lot more challenging over the past few weeks.

The changes invoked by lenders remind me of Claudio Ranieri’s so-called tinkering when he was manager of Chelsea from 2000 to 2004.

We’ve had cut-offs and affordability modelling which have meant that it now takes more work, time and effort to get cases through and even then the end goal is not secure.

I’m all in favour of trying to aim for straight-through processing and being paid for quality, but transparency is vital. Too many lenders have recently sneaked through changes to income and cut-off periods when publicly changing their policies.

Like most brokers, I’m happy to be paid according to quality and the number of manual interventions but I need to know the rules of the game.

As identified a couple of months ago, the increasing cost of borrowing fails to lose momentum. As prices continue to rise, it’s hard to see what will lead to downward pressure on mortgage prices. The issue in Europe continues to bubble on but there is little out there to make a dramatic impact.

It looks like the biggest lenders that control our mortgage supply will just keep putting prices up by around 0.20% a time until they reach their required return on capital employed – the ratio that indicates the efficiency and profitability of a company’s capital investments. I’m worried that there is no end in sight to this.

Rates have now risen in excess of 0.50% since October 2011 on core ranges and SVRs have also increased, but without a corresponding change to the base rate from the Bank of England. It strikes me that major lenders must be seeing significant increases in profitability with these rises.

“We are seeing the beginnings of a shift in the long-term trends which we may not fully understand yet”

In a similar area, the proc fee discussion rolls on. Alarmingly, I agree with almost everything John Malone, executive chairman of PMS, has been saying.

The Financial Services Authority says the number of mortgage advice firms has reduced by 10% and business isn’t going to get easier any time soon. Those firms that remain have proved themselves to be flexible, nimble and entrepreneurial and I don’t see this changing. There is space in the market for all types of broker and those who remain have shown themselves to be survivors of the highest order.

Next, a word about Santander, which announced excellent gross lending returns for Q1 2012 last month. Its performance at 17.2% of the market was strong. This has rightly been commented on – well done to Abbey for Intermediaries’ managing director Miguel Sard and Adrian Whittaker, director of key accounts.

What hasn’t got any attention is that there is no doubt there will be a reasonable reduction in those figures in Q2 and Q3, if Santander’s performance in the first four months of 2012 is any guide. Santander’s market share has fallen significantly year-on-year, but it remains an important lender on our panel.

We have just released our own Q1 review revealing our strongest Q1 since 2007 across all divisions. In financial services we are still thrilled that Sally Laker joined us last year following our acquisition of Mortgage Intelligence, of which she was managing director. Her team has managed to increase market share and volume yet again.

Looking to the wider market, we have highlighted our concerns about the effects of slower mortgage lending – gross mortgage lending is flat at best – and the short-term impact of the Queen’s Jubilee and the Olympics.

We are at a crossroads for home ownership. Our recent research with YouGov highlights the issue, with 45% of 18 to 34 year olds citing deposit affordability as the biggest barrier to buying a property, yet we lack effective government action to support the residential housing market.

On one hand, we have the home ownership market operating at half the long-term average with mortgage inaccessibility and affordability the biggest hurdles for home movers. On the other, buy-to-let lending has strengthened and our corporate lettings division continues to grow significantly each year. These are the beginnings of a shift in the long-term trend which we may not quite understand yet, but where there is a will there is a way.

Snapshots of eternal youth

After what seems a gloomy update, I thought I’d address an important issue. Is it me or are our erstwhile broker commentators taking the same pills enjoyed by Sir Cliff Richard?

I was reading the musings of Mark Harris, chief executive of SPF Private Clients (below left), Kevin Duffy, managing director of Mortgageforce (second from left), and Ben Thompson, managing director of Legal & General Mortgage Club (third from left) and was blown away by their succinct and thought-provoking contributions.

But I wonder when the photos for their columns were taken. In the case of Duffy, it was at least three stone ago and he appears to have regrown a full head of hair.

Thompson’s was definitely taken in the 1990s when he appears just out of school.

Shown below is the photo that will be used for my column from next month. I too have aged somewhat sorrowfully in a balding, heavier kind of way. I call upon us all, as honest brokers, to use a photo less than two years old. As always though, salvation is at hand. There is an exception.

Yes, Andrew Montlake, director at Coreco Group, really does look that bad. It is rare that you take a photo, now used weekly, on what was obviously a huge hangover from the night before. Monty, I salute you!