Star letter: FSCS reform is needed but so are new sources of funds – and from where?
Last week, Mortgage Strategy reported that nine in 10 mortgage professionals believed the Financial Services Compensation Scheme levy should be reformed.
I am in wholehearted agreement. A levy that means the industry has to foot the bill for problem rogues who have left clients in the mire is in dire need of reform.
It is incomprehensible that those who remain in the industry (and through that very fact have gritted determination and something tremendous about them to have waded through and survived the turmoil of the past eight years) should be picking up the tab year after year.
The downside is: where will the funds come from, then, if the only remaining market participants who can be compelled by regulators to contribute are the good guys?
Fifteen years ago, there were well over 250,000 advisers in the UK. By mid-2013, this was down to just over 32,000 regulated advisers, according to the FCA.
Even if we assume we had a long-stop of 15 years, how is it feasible for just 32,000 advisers to pick up the bill for the issues caused in markets so long ago and by so many?
Reform is needed but so are new sources of funds. This is going to be far from easy.
Separately, Mortgage Strategy’s cover feature earlier this month looked at why the larger lenders were ignoring borrowers entering or in retirement.
The Mortgage Market Review and other regulation get the blame frequently from policymakers and lenders and this line of reasoning is used far too often as an excuse not to lend.
It is an interesting situation of trying to alleviate a client being protected from possible financial hardship in the future.
But the issue is that some borrowers are in actual financial hardship now and need some leeway on term to deal with this, which can then better their financial position by the time they retire in 15 years or so.
The downside is that policy is not written with that in mind; it is written with the ombudsman and the FSCS in mind while the lawyers sharpen their cutlasses outside the door.
No matter what decisions are made on age, term and retirement, as long as the industry remains an open chequebook for challenges based on hindsight, we will be damned if we do and damned if we don’t.
The HSBC case is proof of that.
Chris Hulme, Clayton Hulme
Forget H2B – it’s the duff planning system, stupid
I read with interest Andy Frankish’s column last week in which he argued that one could not fault the Government’s policy on new-builds.
But Help to Buy is pouring fuel on the fire of house price inflation, which makes homeownership an impossible dream for too many families.
The Government has to tackle supply and do so a lot more fiercely that the pusillanimous efforts made to date. The problem will not go away until they eviscerate the planning system.
If it was not so tragic, it would be hilariously funny to watch how the Government pushes and pulls the housing market; the more it interferes, the worse the problems seem to get.
Financial regulation does not help much either. If the Prudential Regulation Authority was to tell lenders to hold more capital against mortgages during periods of high house price inflation, it might have some impact.
As it is, mortgage lending is privileged over lending to businesses through the amount of capital it requires, hence we have the houses-as-investments fetish.
Too much money chases housing and not enough goes into manufacturing investment.
What a way to run an economy.