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Lucky No.13

Few in the mortgage industry would have guessed that 2013 would end on such a positive note and even the most superstitious adviser can find reasons to be cheerful and express hope for a prosperous 2014

The number 13 may be unlucky for some, but 2013 has not proved to be so for the mortgage market.

Few people could have predicted in January that the sector would be ending the year with talk of a housing bubble and a pledge from the government to help more borrowers to access 95 per cent loan-to-value mortgages.

2013 has been the year that the mortgage market finally started to see signs of a recovery and with this came plenty of news to debate, dissect, and divide in the pages of Mortgage Strategy.

The Government’s Help to Buy scheme has been the big blockbuster of the year, alongside its sequel – Help to Buy 2.

Other headline grabbers include the UK welcoming a new Bank of England governor – Canadian Mark Carney. The so-called “rock star” of central banking didn’t take long to shake up the market and issue forward guidance, declaring that the Bank won’t raise interest rates until the unemployment rate comes down to at least 7 per cent – which many people interpreted to mean rates will remain 0.5 per cent for the next three years.

Mortgage Strategy also revealed that Lloyds Banking Group plans to link procuration fees to quality of business in 2014. On the whole, the move has been welcomed by intermediaries and led to debate as to whether more lenders will follow suit.

Sadly, the mortgage market said goodbye to industry veteran David Johnson in July, who died at the age of 67 after his battle with cancer. Johnson was credited with creating the specialist mortgage lending market in the UK and was managing director of secured lending at Shawbrook Bank when he passed away.

Meanwhile, claims management firms have dogged the lives of brokers in 2013, this time with interest-only misselling in their sights.

There are however many reasons to be cheerful when looking back on 2013 and in this week’s cover feature we look at why even the most superstitious mortgage broker can find something to smile about in 2013.

January 2013

The New Year started on a positive note, with the Council of Mortgage Lenders predicting gross lending will hit £156bn in 2013, compared to £144bn in 2012.

CML chief economist Bob Pannell says the Funding for Lending Scheme has the potential to cause a “modest pickup” in the UK mortgage market.

A new year also meant a new sales team at Abbey for Intermediaries, which resulted in the axing of its key accounts director Adrian Whittaker.

Whittaker’s departure came as a shock to the intermediary community, with brokers taking to Mortgage Strategy online to wish him well. All Types of Mortgages group executive chairman Vic Jannels describes Whittaker as a “guiding light”.

There was no respite for claims management companies at the start of the year, with Mortgage Strategy reporting that Money Boomerang was looking to target mortgage firms it believed missold interest-only mortgages.

Mortgage Strategy also reveals later in the month that one firm – Mortgage Reclaims, part of Premium Recovery, is circulating ads on Facebook in an attempt to generate mortgage misselling claims, apparently from ex-GMAC clients. The ads were spotted by a consultant at London-based brokerage Coreco Group. The firm’s director, Andrew Montlake, describes it as a “logistical nightmare” for firms, who will have to deal with the paperwork for spurious claims.

February 2013

The mortgage market starts to hear the first whispers of the Government’s Help to Buy scheme in February. Mortgage Strategy reveals that the Treasury is holding talks with lenders and mortgage trade bodies to explore how mortgage indemnity guarantees can be used to improve access to 95 per cent LTV mortgages, including offering MIGs on older properties.

The positive mood continues with the Royal Bank of Scotland announcing that it is to start offering its NewBuy products through brokers for the first time, as experts predict New Buy applications could hit the 10,000 mark in 2013.

There was no respite from claims firms, with Money Boomerang targeting firms it believed missold interest-only loans

Meanwhile, the great and good of the mortgage industry don their glad rags for the annual Mortgage Strategy Awards, taking place at the Grosvenor Hotel. Over 900 representatives from the mortgage industry party the night away, with Legal and General’s director of housing and public affairs Stephen Smith taking home the lifetime achievement award and Barclays’ intermediary business director David Finlay scooping personality of the year.

February also saw the news that PMS executive chairman John Malone is to leave the club at the end of the year – 17 years after setting it up. SimplyBiz Mortgages chief executive Martin Reynolds tells Mortgage Strategy it will be a “sad day” when Malone leaves PMS. Malone will however take on a non-executive role with PMS parent Sesame Bankhall Group.

March 2013

March sees the grand unveiling of the Government’s Help to Buy scheme as Chancellor George Osborne reveals the plans in his 2013 Budget. He announces that the scheme will work in two parts – the first part to come into effect in April as a shared equity scheme for new build homes. The second part transpires to be a £130bn mortgage indemnity scheme, allowing borrowers to access 95 per cent LTV deals through a 15 per cent Government guarantee on properties worth up to £600,000 – which will not be limited to new-build.

It is not long before the industry starts to pick fault with Osborne’s plans, and the Royal Institution of Chartered Surveyors warns the government it “could increase the risk of a bubble – particularly in London and parts of the South East.”

Meanwhile, Bank of Ireland came under fire after revealing it will be hiking rates for thousands of its tracker mortgage rate customers. For buy-to-let customers the rate will jump from Bank of England base rate plus 1.75 per cent to rate plus 4.49 per cent from 1 May. The move is branded as “repugnant” by one of its customers and damaging for the UK financial services industry.

The move came as Financial Conduct Authority chief executive Martin Wheatley criticised lenders for abusing their backbook of borrowers by increasing mortgage rates.

April 2013

The UK waves farewell to the Financial Services Authority and says hello to the Financial Conduct Authority on April 1 – with the new regulator promising to show more teeth than its predecessor.

The country also says goodbye to another controversial figure in April – former Prime Minister Margaret Thatcher. Research released by Knight Frank shows that house prices under the Iron Lady – who sold off the nation’s stock of council houses via Right to Buy – rose by 187 per cent during her 11-year reign.

The Bank of England brings some cheer to the mortgage market during however when it announces that it will be extending the Funding for Lending scheme by a year. Banks and building societies will now be able to make drawdowns from the scheme until the end of January 2015.

Not everyone was happy about the decision though with non-banks criticising their exclusion from the scheme.

Around 30,000 Santander mortgage customers also found out they could be eligible for compensation after the bank gave unclear information before increasing the cap on its standard mortgage rate in 2008.

The FCA and Santander reached a deal in which the bank would contact more than 270,000 mortgage customers after it sent unclear information before raising the cap on its SVR.

May 2013

News of a shortage in surveyors hits the headlines in May, as surveyors warn of big delays in the house buying process if the sector is unable to attract new blood to match an expected increase in mortgage market activity.

E.Surv business development director Richard Sexton tells Mortgage Strategy: “We are in the middle of a perfect storm. There is definitely a supply and demand issue embedded in the market and I do not think there is any short term solution.”

Things were not so dreary for some Bank of Ireland customers, who were celebrating in May after the bank made the decision to reverse its tracker rate increase for 1,200 of its 13,500 customers. The bank says it has identified two groups of customers that will receive a refund for anything charged since the new rate was introduced on May 1. The bank is also being pursued in a class action by more than 300 customers who argue the contract term is unfair.

June 2013

June sees the industry hit out at proposals in the EU Mortgage Directive that will force them to provide an extra annual percentage rate outlining the worst-case scenario for borrowers. Under the proposals, every variable mortgage or fixed rate deal under five years will need to include an APR which shows how the mortgage would have been affected based on interest rates over the previous five years. Your Mortgage Decisions director Dominik

Lipnicki says to add another APR on top of an APR that is already useless to most clients is mad.

The summer months also signal the start of a more buoyant housing market, as figures reveal around 4,000 people have reserved a new home using the Government’s flagship Help to Buy scheme two months after the first phase of the scheme was launched. The FLS scheme however is not yet making an impact on the market with net mortgage and business lending falling in the first quarter of 2013 by £300m, only £2.7bn was withdrawn in Q1 of 2013 compared with £9.3bn in Q4 of 2012.

One sector that is gaining ground however is the secured loan sector, which sees its nineteenth consecutive month of growth in May, with £42.7m advanced, compared to £41.7m in April, according to Loans Warehouse’s Secured Loan Index.

July 2013

The industry is in mourning in July following the death of David Johnson, managing director of secured lending at Shawbrook Bank, who dies from cancer at the age of 69. PMS group chairman John Malone, who knew Johnson for 50 years tells Mortgage Strategy that Johnson had been having therapy for years, but when he heard the news, “it was heart-breaking.” Johnson was credited with creating the specialist mortgage lending market in the UK.

Meanwhile, there are fears that lenders could start pulling their fixed rate ranges amid volatile swap rates. US swap rates spiked after the US Federal Reserve hinted on 19 June that it could wind up its programme of quantitative easing. On 17 June, two and five-year swap rates were 0.75 per cent and 1.34 per cent respectively. But by 20 June, the day after Fed chairman Ben Bernanke says the US could end the programme by the middle of next year, two-year swaps hit 0.84 per cent and five-year swaps hit 1.59 per cent. Paragon pulls its entire range of fixed rate products, while Skipton, Newcastle and Coventry building societies increase their rates on selected fixed rate products.

August 2013

Nationwide decides to tackle the surveying crisis head on in August by upping the fees it pays to surveyors for certain types of valuation work. The news came weeks after RICS cites “squeezed” fees as a key reason why some of the UK’s biggest firms stopped accepting new valuation instructions in busy areas earlier in the summer. In response, Nationwide increases the fees it pays to valuers for situations such as drive-bys, further advances and lower value properties.

Meanwhile, the new Bank of England governor shakes up the market when he enlists forward guidance and says the Bank will keep the base rate at 0.5 per cent until the UK’s unemployment rate falls below 7 per cent – widely expected not to happen for the next three years.

However, Carney adds that the Monetary Policy Committee will have to consider rate changes if inflation is expected to go beyond 0.5 per cent of its target in 18-24 months or if there are any threats to financial stability.

The Association of Mortgage Intermediaries is celebrating after winning £3,500 compensation from HSBC after the banking giant took nearly four months to reject the trade body’s application for a direct debit collection facility alongside its corporate bank account.

The Financial Ombudsman Service supported AMI’s claim for compensation. AMI applied for the service in March 2012 following its split from the Association of Independent Financial Advisers in February, but it took HSBC 15 weeks to tell the trade association that it did not meet its criteria for a BACS service. AIFA collected the fees on AMI’s behalf until May. However, this arrangement came to an end, and as a result of the delay with HSBC it meant

AMI could not collect membership via direct debit fees for the six months until November and in that period could not recover £24,000 in fees. 

September 2013

Lloyds group hits the headlines in September when it announces that it will be following in the footsteps of its rival Santander for Intermediaries, by linking procuration fees to the quality of business submitted from the beginning of next year. The changes will only apply to its BM Solutions and Halifax key accounts, and directly authorised firms will not be affected by the move.

Overall the broker community welcomes the news, but awaits details of the system of metrics by which their cases will be judged. One broker, commenting on Mortgage Strategy Online, says: “The quality debate will rumble on well into the Mortgage Market Review next year and both lenders and brokers need to embrace the issue together.”

Prime Minister David Cameron also announces in September that the Government is bringing forward the launch of the second phase of its Help to Buy scheme by three months.

He reveals that lenders will be able to begin writing loans through the scheme in October, although they will not be able to purchase the Government guarantee that underpins the loans until January, when the scheme will officially launch.

The news is not without its critics though, the International Monetary Fund and Business Secretary Vince Cable criticise the scheme and say it risks steep rises in house prices and the creation of a bubble.

October 2013

October sees PMS executive chairman John Malone call on the FCA to intervene to stop lenders paying brokers higher procuration fees just because they belong to a network. The call follows a Mortgage Strategy investigation that finds directly authorised brokers have missed out on tens of thousands of pounds in proc fees in the past five years because of their regulatory status. On average Halifax paid ARs 5 basis points more between the financial crisis and 2010, but since then the gap had widened to around 8 basis points. Mortgage Strategy reveals that the difference in fees has steadily grown at Santander, from a difference of 2 basis points, on average in 2008, to 6 basis points this year, after it moved to paying quality based pros fees. FCA technical director for mortgages Cathy Thomas however ruled out an intervention when speaking at the Financial Services Expo later that month. She says it is not something the regulator would look at unless it adversely affected consumers.

With the MMR looming, lenders warn that the need to retrain staff could result in application processing delays.

Most on-advised sales will be banned as part of the MMR, meaning lenders will have to train their staff to CeMap level.
The Bank of England’s credit conditions survey says lenders are concerned that the need to retrain its staff to CeMap standard before the MMR’s implantation may hinder their ability to process mortgage applications.

November 2013

The MMR continues to fill the news pages with Lloyds group home and lifestyle director Stephen Nooks warning that it could lead to fewer mortgage products, as lenders look to simplify their ranges.
Speaking at the annual CMLs’ Mortgage Industry Conference and Exhibition, Noakes says lenders could look to simplify their ranges when most non-advised sales are banned in April 2014.

Meanwhile, brokers warn that the problem of major estate agencies pushing in-house mortgage deals onto buyers goes far beyond the alleged revelations in an edition of Channel 4’s Dispatches programme.

The programme was based on secret filming of estate agency branches of Connells, Spicerhaart and Countrywide. Agents tell undercover reporters posing as buyers that they will get priority viewings and their offers will be taken more seriously if they agree to use the firms’ in-house mortgage services. Perception Finance managing director David Sheppard says: “The problem is, in truth, a lot worse than I think the programme portrayed. Not a week goes by that I don’t hear about such cases – this is rife.”

Just a few months after raising hopes that interest rates will be on hold for three years, Bank governor Carney says there is a 40 per cent chance his threshold for interest rate rises could be met by the end of next year – a significant shift from August forecasts when the Bank gave a 25 per cent chance of meeting the threshold by the end of next year – he tells a press conference “the recovery has finally taken hold.”

2014?

With December still taking shape, all eyes are now on 2014. The next twelve months in the mortgage market will no doubt be focused upon the MMR, which will finally come into being in April, five years after the Financial Services Authority started working on it. Close scrutiny will be on the mortgage market to see how it is impacted. Will lenders’ call centres crumble as staff are forced to give advised sales? And will it lead to less mortgage products being offered? Only time will tell. But with the second phase of the Help to Buy scheme already promising a more buoyant market in 2014, all the signs are good. That is, if Carney doesn’t through a spanner in the works with a rate rise or the surveyor crisis stalls growth. Nothing is for sure, apart from that the next twelve months in the mortgage market look set to be just as compelling as 2013.

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