MIG schemes worked before and will again
I feel compelled to put pen to paper once again on the subject of the Help to Buy mortgage indemnity guarantee scheme, as I can’t speak anymore, my tongue is so swollen from biting.
I have not heard so much rubbish spoken about the scheme since Roy Hodgson last claimed England had a good game.
What evidence is there to suggest that it will cause a bubble in the market?
Why is it OK for the new build market to flog houses for far too much money to unsuspecting buyers, but not to help second time buyers up the ladder?
I can think of many of my clients who will move house, with all the associated spending that goes with a move, only because of the scheme. How does the New Build scheme help the economy? It just helps the builders to be honest.
I believe that the increase in demand will be closely matched with an increase in supply, as all those existing homeowners will be able to move, rather than just first-time buyers.
It is this part of the market that will helped by this scheme, first–time buyers are pretty well catered for these days.
Will lenders allow greatly increased multiples to allow a bubble to form?
Are wages going up so much that affordability has enough slack to cater for the wild increase predicted by the doom-mongers? I think not.
I bet that affordability is restricted in some way, anyway. The only reason the market inflated last time, as anyone involved at the time knows only too well, was because of interest-only and self-cert/fast-track.
Neither are around these days, so that won’t be an influencing factor either. Increases in interest rates are a much greater risk than this.
In the old days, MIG schemes were the norm and it all worked pretty well to be honest – I know, I was there.
I think the trouble is most players in the market these days are still in their nappies as far as the market is concerned, and therefore should stick to their dummies.
And as for the business secretary Vince Cable, what does he know about anything, let alone a market I’ve been involved with for over 37 years?
So come on, let’s give a good scheme a chance, you never know we might all do some more business because of it.
Simon ’The Old Git of the Mortgage Market’ Collis
£350 for a CCL with a new logo? FCA is out to make money
The FCA is at it again – taking money from hard-pressed firms for no good reason.
As you will be aware, control of consumer credit regulation switches from the Office of Fair Trading to the FCA from April 2014.
Most broker firms will already have a Consumer Credit Licence; some of them have licences for life.
However, the FCA is now insisting that we all apply for Interim Permission to continue trading after April 2014.
Network members will have dual authorisation: mortgages via their network, consumer credit direct. That’s going to work well.
Oh yes, and we have to pay a fee of £150 (sole traders) or £350 (firms) for the privilege.
I’m left scratching my head and asking why it all costs so much.
Surely it does not cost £350 to print a CCL with a different regulator name at the top?
This is a scandal that the Office of Fair Trading should investigate.
When banks wanted to charge £30 to send out an overdrawn letter, they were ordered to reduce the cost to the £3 or £4 actual cost of producing the letter – so why should the FCA be any different?
Well, we know they are different – they think they are better than the rest of us and deserve more money because they work in one of the most expensive areas of London, instead of being located in the provinces where the costs would have been a fraction of Canary Wharf.
The decision to charge us all is nothing short of a disgrace – although they have generously granted a 30 per cent discount if we apply (and pay) before the end of November for something we don’t need because we have a licence already, bought and paid for!
If anyone ever believed the FCA is anything other than an empire-building, money-making enterprise this should change their mind.
I hope, through your pages, you will bring attention to each and every one of the FCA’s unnecessary extravagances.
It should be possible to maintain an efficient regulatory regime for a fraction of the cost of this lot – remember, the MCCB’s total annual budget was £4.5m and it left behind an surplus when it closed.
Name and address supplied
Osborne is wrong, 95% LTV loans are a sign of toxicity
Chancellor George Osborne last week argued that the lack of 95 per cent loan to value mortgages was a “social problem” as he launched a fierce defence of the Help to Buy scheme and high loan-to-value deals.
Osborne said the housing market was not working effectively, given house prices are down by a quarter from their peak and mortgage availability is running at only half pre-crisis levels.
But I would argue his logic is flawed – 95 per cent mortgages are an indication of toxic lending rather than a desired norm.
While first-time buyers might struggle with a deposit, the LTV should be 80 per cent or lower if you want lenders to take on reasonable risk.
As a government, it can fund the difference through either of the schemes.
That is the government pushing a social agenda and not fixing a broken lending market.
If we had 15 per cent inflation or higher, then a high LTV loan might be safer after one to two years.
With low inflation, the borrower has to have real cash in the deal rather than expect a bank to shoulder all the risk.
As the credit crunch proved, high LTV loans are a time bomb waiting to blow up. Better to keep people in rental accommodation or find other means to deal with the situation vs. forcing the banks to roll the dice. Taxpayers do not want to bail out the banks a second time.
Oh no he isn’t! High LTV was standard practice years ago
Sorry, John, I have to disagree with you on that one. 95% mortgages are not toxic lending or timebombs waiting to go off.
As I’m sure you are aware LTV is not the only risk factor involved in lending. If people have stable jobs and have borrowed at an affordable level for their income there wouldn’t be an issue.
Even at a very modest rate of property inflation all would be well. In fact 95 per cent lending was standard practice going back to at least 1991 when I bought my first house with a 95 per cent mortgage.
I managed to save my £1,500 deposit from my wages of £9,000 and my £28,500 mortgage was affordable.
With my stable job, if house prices went up or down I still had an affordable roof over my head and my mortgage was always paid.
From a lenders point of view if a customer is in stable employment and have an affordable mortgage they could drop into negative equity for a while, still pay the mortgage and no loss would be realised.
Those who focus too much on equity miss the entire picture of borrowing and lending.
Personally I’d rather lend 95 per cent to someone in their job for 20 years, who has lived at the same address for donkeys years, borrowing two times their salary than 80 per cent to someone who started their job six months ago, has been given a large deposit by their parents and wants five times their income. I don’t want to be repossessing the latter in 12 months time when he’s lost his fifth job in the last two years.
Name and address supplied
No need for a new CMC regulator, just improve standards
The financial trade press widely reported last week comments from the All Party Parliamentary Group on Financial Services chairman Jonathan Evans last week in respect of the regulation of claims management companies.
Evans is quoted as saying, “I believe claims management firms need a serious regulator. It is perfectly clear the MoJ does not have the capacity, expertise or resource to be able to properly regulate CMCs. The MoJ register firms and deals with technical issues on details without proper conduct regulation. I believe it should be the FCA, it is the obvious place.”
One only has to look at the annual report of the Claims Management Regulator so see that the claim by Evan’s is not accurate. For the avoidance of any doubt, the CMR has teeth and uses them to deal with rogue CMCs. As the regulatory activities during the year April 2012 to March 2013 show the CMR refused four applications, authorised (with conditions) six applications, suspended seven registrations, cancelled 211 registrations and issued 285 warnings. Not bad for a regulator which is accused of operating without applying “proper conduct regulation”.
It strikes, me that we are back in the situation before statutory regulation of the mortgage industry. At that time there was a voluntary regulator which was effective in terms of regulation and cost-effective in terms of annual budget management. European legislators required a move to mortgages being statutorily regulated across Europe; hence the requirement for the regulation of mortgages to be moved from the Mortgage Code Compliance Board to the FSA.
What was the result? Mortgages were not any better regulated (as evidenced by the lending debacle between 2005 and 2008) and the cost of regulation increased exponentially.
There is a lot of sense in the saying, “if it isn’t broke, don’t fix it”. The CMR is not broken, so there is no need to move regulation to another body. Of course, like in all industries, there are firms who operate within it who do not put the needs of customers first. Those firms need to be weeded out. What legislators, regulators, financial institutions/advisers and CMCs need to do is work together to raise the standards within the CMC profession – both within those firms who manage claims and those firms who receive them.
Professional Financial Claims Association
Down-valued by RICS bubbleheads
I read with interest on Friday that the Royal Institution of Chartered Surveyors want to cap property price rises to 5 per cent per annum with intervention, if necessary, from the Bank of England.
Some cynics would say they were already doing that. Where is the bench mark 5 per cent drawn if a property did sell last year how will they judge the increase?
They talk about the property bubble. In my part of the country the only bubble are the bubble heads from the RICS who down value property at the drop of a hat and require three comparables in the last three months if you wish to challenge their “expert” valuation. What ever happened to the law of supply and demand?
MT Financial Services