At presentwe have what I would describe as spontaneous – some might say knee-jerk – regulation ostensibly to save a comparatively small number of potential rogues from themselves while the majority suffers along with them.
The lending market is crying out for products that will allow those who, perhaps through no fault of their own, have missed a payment or got themselves into arrears.
These people may be getting back on their feet, but now have a less than spotless credit record. What chance do they have of securing loan or mortgage finance to fund a business?
This moves us to the issue of alternative lending as a consequence of mainstream lenders becoming risk-averse.
Instead everyone must opt for vanilla business because this is the only flavour allowed.
Positive sentiment needs to be encouraged but with the computer constantly saying no is it really a surprise that we limped into a double-dip recession?
Those who want to innovate and grow the economy will not have the chance because the risk involved in helping them has been deemed too great. Unfortunately, funding from new alternative lenders is too little or too restrictive, or in most cases both, for any real volume lending.
Accordingly, unless the new government initiative works, which I do not think it will, entrepreneurs are becoming an endangered species at a time when we need them most.
Too much help for new-build will stall sales of older homes
While promoting the NewBuy scheme is assisting first-time buyers to get onto the property ladder it is not helping the rest of the market.
By constantly incentivising the purchase of new-build properties first-time buyers will ignore older properties. This means that the buyers needed to start chains of transactions will no longer be there.
This rebounds not only on sellers of older properties but on the market as a whole. A further tax incentive for NewBuy would disproportionately affect the housing market.
In Ireland, where Stamp Duty is not paid on new-build but only on older property, there was a huge increase in property development. People with older properties could not sell at all and now all those new-build properties are laying vacant and unsold.
We need a government incentive not only for new-build but for second and older properties too.
Dump the old boys’ club and let brokers sell every product
The Confederation of British Industry recently called on the government to make the NewBuy scheme more appealing to first-time buyers.
In a speech to an audience of business leaders in the South-East, John Cridland, director-general of the CBI, argued that the government should be willing to take more risk under the initiative.
NewBuy offers first-time buyers a 95% mortgage to purchase a new property, and not at ridiculous rates. How much more appealing would the CBI like it to be in this climate?
One idea would be to make all the products available through all brokers as then we could send clients to builders if they only had 5%.
Surely that would get more houses sold than keeping it as an old boy’ club and builders sending clients to their panel of brokers?
Empty homes could be price of high cost of living in London
Last week’s leader in Mortgage Strategy made an interesting point about the consequences of a housing market where it’s unaffordable to buy but also expensive to rent.
Landlords are slack-jawed at how much money they can wring from people’s pockets. And no wonder – as long as the UK remains a stable democracy, people will flock here meaning this relatively small island will be a boon for property developers.
At some point though the bubble will burst, with the irony being that any nation prone to overcrowding becomes a more unpredictable place to live. Sophisticated, rational and liberal people of all colours will simply up sticks and leave.
Already people of my generation in their mid-30s are thinking of getting out, particularly of London which is saturated.
A better quality of life, a slower pace and more affordable living are attractive options which are being eroded from the UK’s crazy cost of living.
Should that happen would we see areas like London end up like Ireland where properties are going begging? Strange to think that such a thing could happen but it could.
Landlords may be making lots of money but they could end up shooting themselves in the foot.
Barclays’ behaviour shows that grubby banking remains rife
The Financial Services Authority last week fined Barclays £59.5m for misconduct relating to LIBOR and Euribor.
It’s great that Barclays has been fined – this is the largest fine ever imposed by the FSA – but why did the bank’s internal compliance and that of the FSA not work in the first place?
Yet again we see the grubby side of banking. Can you imagine how these criminal actions affected knock on market costs for ordinary customers?
Insider trading and fraud seems rife at the large banks. When will they regain a sense of morals? What happened to good honest banking?
Chairman of CML is right but lenders are doing as they please
With regard to recent comments by Martijn Van der Heijden, chairman of the Council of Mortgage Lenders, that lenders need less of a sales culture and more of a service culture, I couldn’t agree more.
Speaking at the CML’s annual lunch in London in June, Van der Heijden, who is also head of lending at HSBC, told attendees that before the credit crunch mortgage lending sleepwalked into adopting a sales culture.
“I think we have to get more honest, more transparent, more intelligible, to our customers,” he told the audience. “We need to make a true cultural shift from a sales culture to a service culture.”
I doubt there is any lender whose service is up to a standard that anyone could say is acceptable or comparable to the service in many other industries.
The reason is simple – banks and finance lenders run the world and can do as they please with no-one overseeing how actual customers are treated. NatWest, for example, promotes helpful banking – has anyone found this to be true?
If lenders treat staff fairly their service levels will improve
The CML chairman is right that the whole culture needs to change, especially the major banks’ commoditisation of people in service departments, where cost cutting is made to pay for the excesses of those so-called golden boys and girls in their trading departments.
Loyalty is a two-way street and until banks start to show some loyalty to staff and invest in them, standards of service will continue to be below an acceptable level.
Brokers also need to be more professional and submit all cases with full and accurate documentation in a timely manner.
And some lenders should prune their number of mortgage options as there is no need for 300-plus variations, especially in today’s market.
Sanctimonious CML should have acted before the crunch hit
I don’t think there is much in the CML chairman’s reported speech to which one would object, other than the fact that it is two faced.
This is the CML breast beating after the event. Why was it not implementing these sanctimonious propositions before the credit crunch? Why was there so little discipline leading up to the credit crunch?
There is no point crying about the impact of regulation now when nothing was done beforehand.
If nothing else lenders had the example of the rest of the financial industry to follow, yet obviously failed to understand anything that was going on.
Merely bending with the prevailing wind shows no evidence of back bone or real commitment.
Service and selling should go hand in hand. If you have any doubt about that read Schumpeter in The Economist last month, which highlighted the problem of concentrating solely on one characteristic.
And why does the CML want someone else to take responsibility for regulating bridging finance?
It’s the fact that they cannot take responsibility for the activities of their industry that requires an outside agency to step in – and then over-regulate.
Has anyone asked consumers whether they want a sales environment, service environment or merely a professional approach to mortgage lending?
FSA has taken finger off the pulse with the real problem – banks
The Financial Services Authority last week revealed that Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland had agreeda settlement with it to pay appropriate redress to small and medium sized businesses that were mis-sold interest rate swaps.
With all this news coming out in the last 48 hours I would suggest the good old FSA has taken its finger off the pulse with the banks and spent too much time trying to put small brokers out of business.
Please Mr FSA have a look at the real problems within the industry – the banks.
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