After nearly 28 years representing the UK’s mortgage providers, the Council of Mortgage Lenders will cease to exist in its current form as of 1 July and chief executive Paul Smee will step down after overseeing the transition.
The body that represents 97 per cent of the lending market is to be merged into a new trade association – UK Finance – along with five other groups: The British Bankers Association, Payments UK, Financial Fraud Action UK, the Asset Based Finance Association and the UK Cards Association.
Ahead of his departure, Smee sat down with Mortgage Strategy to discuss his time in the role, the future for the body and the message he’d like to leave with the market.
First up, Smee – one of the founders of the Association of Mortgage Intermediaries – is eager to ensure that the new body, which will be known as the Mortgage Product Board within UK Finance, maintains the close relationship with intermediaries established by the CML.
“I set up Ami in 2002, when I was at Aifa and intermediaries didn’t have a trade body.
“I built it off the side of a desk and I’ve always had a soft spot for mortgage intermediaries; About 70 per cent of mortgage lending is done through them.
“In the time that I was away from the industry (working in APAX) the number of intermediaries reduced and the quality increased. There are far fewer now but boy are they better and offer a more professional service.”
“There are some key differences with mortgages [than with the other bodies in UK Finance], for example we deal with intermediaries, whereas other parts of the market aren’t half as intermediary-focused, so the mortgage part will need to remain honed in on the intermediary channel.
“We have to keep the relations with Ami and Imla going and meet quarterly. The board is geared up for that sort of relationship.”
Smee says that his first concern, when the merger was confirmed, was to ensure the message delivered was that the CML was doing a good job and it wasn’t something “we brought on ourselves.”
“I was really keen that the mortgage side doesn’t get meshed in with those other bits – which is six bodies put together – to a point that the small guys would think ‘what’s the point of belonging?’,” says Smee.
“Our executive committee will initially become the Mortgage Product Board and won’t be far away from what the CML executive committee looks like. It will report into this big board of UK Finance but it will be a mortgage voice and have a mortgage agenda and people will be able to join just the mortgage bit, not every bit, as that’s so important to the market.
“We’ve tried very hard on the merger; what we want are happy members.”
There are definite benefits of joining the new body, according to Smee, who says that the same faces will be present at UK Finance as were well known at the CML, which should ease the transition.
“There are areas that crossover where a lot of trade bodies would do their own thing but if we brought it together it would be more efficient. That is things like vulnerable customers; some of the things to do with fraud, etc,” says Smee.
“The message to members is to stick with it, to keep contributing and look for the benefit of the merger.
“A lot of the CML staff will be transferring over to the new body so that will help the transition. It’s not just intermediaries; housing policy is devolved. When UK Finance talks to the Welsh, Northern Irish and Scottish Government it will be at a very strategic high level. The Mortgage Product Board will have to get down with tenants rights in Scotland or the legislation the Welsh are putting through on rented accommodation.”
Challenges: Then versus now
Smee has been in the chief exec role at the CML since 2011, and says things have changed considerably in that time.
“The biggest challenges when I joined the CML were low volume, no high LTV lending, general dejection in the market – nobody had gotten over 2008.
“To overcome this, first we had NewBuy – which nobody remembers – which was the CML’s own initiative, then we had Help to Buy. Getting that as part of the mainstream was a huge boost.
“We then had MMR, which never went away. It had to happen. What happened before was too exuberant. I could never get my head around self-cert. It came to a point when underwriting didn’t matter. So of course there was a reaction.”
There have been several major regulatory shake-ups during Smee’s time at the helm of the CML but he says that the FCA’s study into competition in the market should look at broker/lender relationships, the use of technology and transparency.
“An area I think is inevitably going to come up is how information is given to borrowers,” says Smee.
“We’ve done a lot of work on transparency but the thing I’m interested in is how price comparison websites fit into the market.
“I think they have a role but also limitations and I think it’s important that people know what they are. People may think they’re getting advice, but that’s not what they are there for.”
Smee says that the buy-to-let market will change direction, following a host of regulation and tax changes, but it’s yet to be known what that will look like.
“It’s not the end for buy-to-let,” he says.
“It had a very good, very hard run and in the run up to the stamp duty changes, you were going to have very good figures. It will be some time before we can say what the new normal is. I suspect what you will see are those who aren’t really committed to the market getting out; those lenders who are on the edge. Everybody talks about dinner party landlords but I suspect dinner party lenders will be the ones who back off a bit.
“I think it will take some time before we see what the new normal is.
“For the committed, I’m sure they’ll go on doing new business. I don’t see a wholesale shift away from the private rented sector.
“It will remodel a bit and you’ll see different levels of transaction different structures etc.”
While Smee will retire from the CML, he plans to continue having some level of involvement in the mortgage industry.
“I won’t be retiring completely; I’ve run trade bodies for 18 years now and it’s exhausting. Now is a good time to move on but I hope to stay around the market and have a portfolio career. I’d like to stay in touch with mortgages.
“Chief executive Steven Jones will head up UK Finance and then he’ll have direct reports with various titles. I think there’ll be an identifiable mortgage person, we certainly asked for one.”
What would you change?
If there was one thing he would like to have achieved in the market that didn’t quite happen, Smee says it would relate to lending into retirement.
“If tomorrow was my last day I’d be thinking I’m sorry I didn’t crack the lending into retirement issue, we made a lot of progress but didn’t crack it.
“I’d also like to see a better home conveyancing process. I think there’s such a complicated chain involved in housing transactions; It’s not the mortgage bit, it’s all the rest around it. I hope the next government does a study, because it isn’t something for us to drive.”
“I’d really like to feel that house building was on an up. It’s gotten a lot better but needs to be driven forward.”
“One of the things I am most proud of is that we diffused the ‘ticking time bomb’, says Smee.
“If you look at the stats and how the industry has contracted and how many people are paying off their interest only mortgages, it’s a real emphasis on how an industry working together can achieve something.
“We need to keep encouraging them to pay down but the political toxicity of the subject has dissipated.”
Smee had one particular final piece of advice for the future mortgage body.
“Spend the vast majority of your time looking outward not inward: Look out to the stakeholders and the members, don’t look inward.
“I’ll miss the team at the CML and the feeling of being in the middle of a really important market – that is the wider housing community – and being in an industry where we touch so many aspects of public policy is great; it’s like being a spider in the centre of a really important web.”