May saw the new government polish off Home Information Packs, a mortgage network saved, a question mark over the future of interest-only loans and the emergence of a new name in the lending world
The coalition administration wastes no time killing off HIPs, which it describes as expensive and unnecessaryFor most in the housing industry May will be remembered for two major events – the birth of a coalition government and the death of the much-maligned Home Information Packs.
Of course, the latter could not have come about without the former.
Initially, as the most intensely fought election for decades ground to a conclusion the country was left in limbo as no party received an overall majority.
The Liberal Democrats, long considered a wasted vote given the unlikelihood the party would make it to 10 Downing Street, saw a surge in popularity thanks to the performance of leader Nick Clegg in three live television debates. Clegg declared his intention to go all the way by announcing he wanted to be the king rather than the kingmaker. But as stirrings about the possibility of a hung Parliament emerged he told reporters that his party could dictate the policies of the next government.
With opinion polls suggesting the Lib Dems would hold the balance of power Clegg confidently told his party’s pre-election conference that it could win one in three of the votes cast.
Many thought it was the end for Gordon Brown and Labour but the party battled on and in the end the outcome was anybody’s guess.
All the polls running up to election night predicted a hung Parliament, with the Tories having the bulk of the seats and an outside chance of a majority.
Despite all the confidence none of the parties did as well as they had hoped.
As May began there was hope for troubled network Home of Choice as it was re vealed that directors were in rescue talks with a plc. Then, on May 7 we heard that LSL Property Services had bought the ass ets of the network for £1.5m
The Conservatives took 306 seats, an increase of 97 on 2005 but not enough to clinch a majority. Labour managed 258 seats, a loss of 91, while the Lib Dems, despite mounting the most positive campaign in decades, ended up losing five seats.
So we had a hung Parliament.
What followed was an extraordinary week in politics and one that had the country gripped. After the confusion we ended up with a Tory-Lib Dem coalition government with Tory leader David Cameron as Prime Minister.
Before the unprecedented election results were announced the mortgage industry was dealing with the grim possibility of another fatality. At the end of April network Home of Choice filed notice of its intention to appoint administrators.
But as May began there was some hope for the network as our sister magazine Mortgage Strategy revealed the directors of Home of Choice were in 11th hour rescue talks with a plc.
The deal came to fruition on May 7 when we heard LSL Property Services had bought the assets of the network for £1.5m.
An announcement to the London Stock Exchange stated at the time: “The business is being acquired from administrators and this is not expected to have a material impact on the group’s earnings in 2010.
“Home of Choice is a fast growing multi-tied specialist mortgage network provider to some 500 self-employed advisers with extensive expertise and knowledge of the mortgage market.”
Good news for Lloyds group
And there was good news for Lloyds Banking Group early in the month when it revealed it had returned to profit in the first three months of the year, recovering from a £6.3bn loss in 2009.
The group, which is 43% owned by taxpayers, says it has returned to profit thanks to a slowdown in its level of bad debts. It says it has seen lower impairments across its retail secured and unsecured lending portfolios.
The level of impairments in the group’s wholesale division also fell compared with both the previous quarter and its original expectations for Q1 2010.
Although lending remained flat in Q1, customer deposits grew by more than £5bn.
The firm says the level of assets in its run-off portfolio is also continuing to fall, although it admits this is at a slower pace than last year. It adds that it has been encouraged by what it sees as improving conditions in the whole- sale funding market.
Lloyds group then launched a securitisation deal backed by mortgages from Lloyds TSB and Cheltenham & Gloucester.
As the excitement of the election died down and our political leaders set about deciding who would be doing what in Clamelot the industry’s focus turned inwards as the Council of Mortgage Lenders hit out at the Financial Services Authority’s plan to include all lenders’ staff in its approved persons regime. Back in the black but Lloyds group gets tough on interest-only dealsIn an issue of News & Views the CML stated that it supports the FSA’s plan to stop rogues entering the mortgage market and track them but doesn’t think this should apply to all staff at lenders.
It said at the time: “In our view there is a compelling case for greater regulatory scrutiny of the intermediary sector but the justification for the proposal to include all lenders’ staff in its plans for an extended approved persons regime is less clear.”
The CML argues that there are important differences between lenders and broker firms and it is not convinced the FSA has recognised these.
Based on estimates it has collected from lenders it says some 14,500 people could be captured by the proposal.
And the CML adds that considering the number of brokers in the market, the regulator’s assessment that there will be 20,000 new approved persons seems a significant underestimate.
Then, after getting back in the black earlier in the month Lloyds group caused a stir when it announced it was to revise the terms of its interest-only deals. The lender says that borrowing over £500,000 will now only be available on a repayment basis.
The group has also decided that interest-only borrowers need to have valid repayment vehicles in place. The sale of a main residence or other assets will no longer be accepted as proof of repayment.
The initiative sparked concern about the future of interest-only mortgages.
But Nigel Stockton, sales director of mortgages at Lloyds group, says: “Taking a loan of more than £500,000 is a significant commitment.
As the month drew to a close there was a boost for the sector as the founders of Exact launched a mortgage lending operation – Precise Mortgages. The company intends to focus initially on lending in the buy-to-let sector
Allowing this amount of borrowing exclusively on a repayment basis is the only way we can guarantee to borrowers and lenders that the capital amount can be repaid.”
It was claimed that other lenders would soon follow in Lloyds group’s footsteps.
In 2008 Abbey for Intermediaries reduced its maximum LTV for interest-only deals from 85% to 75%.
But the Post Office took a different stance to Lloyds group on interest-only deals, making a range of 90% LTV products available on both an interest-only and capital and interest basis.
And there was more activity in the lending world as details emerged about new entrant Aldermore’s product range. Aldermore loans for house purchase and remortgages will be available up to 80% LTV, with a choice of two-year discounts from 3.98% and three and five-year fixed rates from 4.93%.
In the buy-to-let market Aldermore is targeting experienced landlords. Its mortgages will be available up to 75% LTV for purchases or remortgages, with a choice of two-year discounts from 4.98% and three and five-year fixed rates starting at 5.78%.
For residential mortgages no bankruptcies or individual voluntary arrangements will be accepted, nor will mortgage arrears in the past 12 months or County Court Judgements and defaults in the past 36 months.
For buy-to-let no bankruptcies, IVAs, arrears, CCJs or defaults will be accepted.
Aldermore’s base mortgage rate will be 4.98%.
On May 20 the industry heard the news many had been waiting for as the Tories kept their promise and scrapped Home Information Packs.
Communities secretary Eric Pickles and housing minister Grant Shapps suspended the requirement for home owners to provide HIPs when selling their homes.
Pickles says he took this swift action to avoid uncertainty and prevent a slump in an already fragile housing market.
He believes HIPs are holding back the housing market because sellers are having to fork out extra cash just to be able to put their home up for sale.
The government says suspending HIPs will cut the cost of selling a home, remove a layer of regulation and provide welcome help to the housing market.
Sellers will still be required to commission – but won’t need to have received – an Energy Performance Certificate before marketing their property, and the gov- ernment says it will consider how EPCs can play a part in the new drive for a low carbon economy.
Pickles says: “The expensive and unnecessary HIPs raised the cost and hassle of selling homes, and stifled a fragile market.”
A happy ending
Then, as the month drew to a close there was a massive boost for the lending sector as Exact founders Alan Cleary, Ian Lonergan, John Nixon and Sebastian Maloney launched a new mortgage lender – Precise Mortgages.
The team once again called on its funder Elliott Associates, a large and established investor, to facilitate its move into lending, focussing initially on the buy-to-let sector.