It could not be tougher out there.
Chief executives of lenders are fighting battles to keep funding lines open, even at reduced LTVs.
No-one should doubt that even in the largest firms these leaders are having to justify having access to the limited amount of money available to lend. Also, lenders with funds are working very hard to keep service levels at or near the right levels.
We are all coming to terms with the new CCA rules and the fact the at all loans are now regulated. This has slowed funds getting to customers and therefore cash flow.
Brokers are deluged by customers wanting to borrow, but sorting out those who have a chance of getting approval from a lender and getting it to completion before the deal disappears means that brokers are having to use all their skills to just break even, never mind make a profit.
At a point like this we at the Association of Finance Brokers are working hard with our colleagues in the Association of Mortgage Intermediaries to encourage government, the Bank of England and regulators to take the right steps to revive the first mortgage market.
Only when this is done will life be fed back into the secured loans market. There is no “silver bullet” solution.
We have been exploring the option of the Bank of England providing additional liquidity into the market and relaxing criteria for lending between banks. However this must come with the caveat that any funds released must be beneficial to borrowers and not be hoarded by lenders in order to improve their capital or meet FSA requirements.
AMI and the AFB strongly feel the measures announced by the Band of England releasing £50bn to the market were long overdue, but do not go nearly far enough.
The mortgage market has passed the stage where it is able to heal itself and find a resolution to the current crisis. If the market carries on as it is, consumers will continue to suffer as the availability of suitable products will continue to dry up and the both the mortgage and secured loans industries will continue to shed jobs at an increasing rate.
This will open up the potential for a shortage of experienced brokers and advisers, at a point in time when they are most needed.
The greatest impact will always be with consumers who may find themselves restricted in the mortgages and loans on offer, forced to deal with just the few largest players, being offered less competitive deals, and finding that the help they really need is far harder to come by.
Therefore a package of measure are required which will restore confidence as well as liquidity. We hope that this will happen sooner rather than later.
All of this is happening at the same time as two other significant challenges. The FSA continue its work on Payment Protection Insurance, with new rules on how to sell it being implemented in July, the Competition Commission due to publish remedies in May and the Ombudsman continuing to address specific customer complaints.
Against this back-drop penetration rates are falling at a time when consumers need protection more than ever. The regulators need to look at their actions and part in this and ensure that they create the climate where consumers are recommended to have the right protection when borrowing.
Also the Consumer Credit Directive has been passed by the European Parliament. This means that the Consumer Credit Act 2006, which is still being implemented, needs amending before April 2010. Secured loans will either need to be part of a new “two-tier” Consumer Credit Act or they could be brought into line with mortgages as part of FSA mortgage regulation. Where do you think this would fit best?
So Lenders, brokers and customers all face huge problems. Only by working together and understanding each others issues will we get good, sustainable solutions. The AFB is here to help achieve that, so join and be part of the debate and framing the future.