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Let’s all look on the bright side of life

I read with the usual trepidation the recent article on Mortgage Strategy Online from Home Funding managing director Tony Ward on the consequences of a Greek exit from the euro and that it would lead to a catastrophic reduction in lending.

With news from the Council for Mortgage Lenders that gross mortgage lending was 19% down in April and the Financial Ombudsman Service reporting a 35% increase in mortgage complaints, you could be forgiven for packing all your stuff in a raft and sailing off to find the lost city of Atlantis.

So after a pretty downbeat review from myself last month I thought why not look for the positive to show why things aren’t as bad as in 2008 and 2009. So here it is – this article should be set to the theme tune of ’Always look on the bright side of life’.

The mortgage market this year will be £130bn, plus or minus £5bn. It is really difficult to get to less than that. At the end of May we roughly knew the completion figures until the end of August – just take 66%-70% of the business you’ve already written. So we already know it won’t go lower than this and our biggest supporters – Santander and Halifax – have already declared what they expect in 2012. With HSBC going well and possibly ahead of its £15bn declared plan, Nationwide, Coventry and Yorkshire are all lending, so why can’t we show a little confidence?

Few of these lenders depend on wholesale markets for funding – an issue dominating the headlines of late. Indeed, lending in April was up 2% year-on-year so this looks like a structurally sound position despite the unhelpful comments from industry doom merchants and naysayers.

The mortgage market this year will be £130bn, plus or minus £5bn. It is really difficult to go less than that

Similarly, despite whatever is thrown at it, the market is underpinned by 40,000 to 45,000 transactions a month. The fact remains that people are still getting divorced, relocating for work, moving to bigger houses and dying. Despite the total absence of anything meaningful from a government that appears to have given up on the private housing market (perhaps they are building their raft too?) this market is underpinned by people getting on with their lives.

At the time of writing this, we seem to be enjoying a respite from mortgage price increases – for now at least – as we all wait to see how many of Ward’s predictions come true. Looking back, we know that since October there has been an unrelenting increase in mortgage rates – between 0.75% and 1% have been added to margins while three-month LIBOR has not risen anything like as much.

The banks are making big fat profits on their lending so most of them may want to keep to their lending targets in 2012 and 2013. Nationwide has just started to reduce a few fees here and there. It’s not much but I reckon all the lenders are thinking the same thing – that they have gone far enough for now and prices may settle for the next month or so.

Because Q1 2012 was good, we all have a breather before Q2 and Q3 bite. We often like it this way around if we are careful with our costs and cash. With lending down 5% year-on-year, I think it is far better to have a good quarter banked than to be waiting for it later in the year.

Here’s an important question: Is your broking business going to fold because lending volumes are down a measly 5%? No, mine neither. I’m going to sell more life and protection, and attempt to gain a bigger share if the market has fewer transactions.

I predict the vast majority of those still around me in the broker market are going nowhere, but will instead hunker down again and continue to compete with me. Good.

Yes, it’s tougher than we would have all liked but more sustainable value is created in downturns than in a positive economic climate. All the more reasons to be positive about your chosen business model and to ensure you implement it well.

End mis-claims with £250 fee

The Financial Ombudsman Service’s complaints data fascinated me. What a mess.

I wonder if it is being structured by the boss from the 1970s TV show The Fall and Rise of Reginald Perrin – I can just imagine him spouting “I didn’t get where I was without submitting bogus claims in their thousands”.

When the regulator starts moaning that the forms weren’t filled in correctly and that vast numbers of claims had to be sent back, and then questions the validity of a whole legion of payment protection insurance claims as non-existent, then we have big trouble.

I could solve this issue at a stroke – simply charge the submitting person/claim company a £250 admin fee for every wrongly submitted claim or claim that doesn’t exist. It would stop all this nonsense in a heartbeat.

When considering that brokers do almost 50% of the lending, I was encouraged to see that complaints against brokers were only up marginally from 16% to 18%. This proves to me that most brokers are highly professional and give excellent advice.

Santander changes need time

Let’s all see how these changes in Santander’s proc fees bed down. The principle has to be right and the distributor who submits better quality applications – which have less chance of going wrong – should be rewarded more than a distributor delivering any old rubbish. I think all sensible people would agree with this.

There are those who say it is up to the lender to decide who gets the money, we just submit an applicant and if their scorecard doesn’t weed out poorer quality applicants then more fool them. This strikes me as a part abdication of our responsibility as brokers in recommending a lender.

No, the question is in the implementation – as with all of these types of initiatives. Using a proxy for quality is a decent enough place to start. Knowing Santander well, it will look at how things are working out. I’m sure that if it isn’t working as it expects then it will move if necessary.

Let’s not leap to any conclusions until we learn more – and that’s coming from someone who now has two fees, one for Countrywide and one for Mortgage Intelligence.




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