Lenders need innovation in their approach to mortgages and the authorities should allow them to get on with it
Banks have taken a number of blows recently. They have been shaken but are now steadying themselves, albeit on the ropes of government support.
Meanwhile, the pendulum swing of regulatory scrutiny is further stifling the appetite for mortgage lending.
Non-bank lenders not only feel bruised but also isolated and unloved.
Opinions differ amid uncertainty in the housing market but the consensus seems to be that lending supply will not meet demand. So where will the money come from?
Building societies and specialist lenders have limited agility while their deposit-based lending model is not robust in a low interest rate environment.
Equally, in this risk-averse environment no single substantial player wants to move up the risk curve by offering higher LTVs or dominating a particular sector for fear of attracting regulatory attention. Even goliaths need competition.
Regulatory changes seem poorly timed and constricting rather than stimulating in nature.
Two years down the line, how many new entrants will we see? Blocking may not be the right word but the Financial Services Authority seems at least to be choking desperately needed competition, free of the shackles of legacy assets and tainted reputation.
So diversity in the market is falling rather than rising.
And unlike in the US, government support in this country has targeted banks rather than the mortgage market directly.
Some 95% of US mortgages are now originated and backed by the government following its takeover of Fannie Mae, Freddie Mac and Ginnie Mae.
Regulatory changes seem to be poorly timed and constricting rather than stimulating in nature
The $700bn Troubled Asset Relief Program and Public Private Investment Program funding in the US has focussed on residential and commercial mortgages, and related securities.
Here, we have seen broader bank-biased recapitalisations, guarantees, enhanced Bank of England liquidity support and government schemes to protect assets.
The Bank also appears opposed to securitisation as an alternative funding mechanism, and here it may be missing a trick.
The feeling in the UK mortgage industry is that we are at the beginning rather than the end of a problem.
Unemployment is high and expected to rise further. Interest rates are being held artificially low and the government and sterling cannot hang on indefinitely.
Banks have more options, given their structure and the diversity of their product and service offerings.
If banks do nothing to change the way they manage their mortgage business they will lend less on decreasing margins. And if specialist lenders and societies do nothing they will go out of business.
One thing that history tells us is not to rely on government or regulators to be proactive. Lenders must drive innovation while lobbying for change.
We need more balanced and targeted support across the UK mortgage industry combined with regulatory help rather than hindrance.
Without change competition will die, and less competition will limit product diversity and constrain lending.
Richard Powell, European managing director, Newbold Advisers