Imperative to maintain high-LTV market once Help to Buy 2 is over
The latest completion statistics for the Help to Buy 2 scheme were released by HM Treasury this month and, if you take an overall picture of the scheme from its October 2013 launch to the end of 2015, it seems a positive view.
However, beyond the headlines of ‘150,000 completions within Help to Buy’, if we dig a little deeper we see some worrying trends, particularly in relation to high-LTV lending – the mainstay finance resource for first-time buyers.
For instance, between 2014 and 2015 there was a year-on-year fall in the number of HTB2 loans of 12 per cent – down from 38,743 to 34,168. This was at a time when you might have considered the scheme to be in its prime.
Again, the positive message for the Government and the Treasury is that 79 per cent of all HTB2 loans were taken out by first-time buyers – just the demographic the scheme was aimed at.
And the importance of HTB2 to the provision of high-LTV loans cannot be underestimated – by our understanding, HTB2 completions represent over 70 per cent of all lending between 90 and 95 per cent LTV.
That is a significant amount. The figures reveal that the volume of HTB2 lending was circa £5bn with an LTV average of 94 per cent. According to the Council of Mortgage Lenders, the total volume of 90-95 per cent LTV lending last year was circa £7bn.
It is perhaps no wonder that commentators and stakeholders such as ourselves are voicing concern about what may happen to the high-LTV lending landscape when HTB2 closes at the end of the year.
We are certain that many HTB2 lenders will continue to offer high-LTV products.
However, the volumes (as shown by the Government data) are already waning, and who is to say what may happen when the scheme closes? There are certainly no – pardon the pun – guarantees of lending activity.
The consequences of even a small drop in 90 per cent-plus LTV lending will be hugely significant for first-time buyers, let alone what may happen if lenders decide to pull out in far greater numbers after the end of HTB2.
Looking at these figures, and at our expectations that 2016 will follow a similar pattern, the need to ensure a strong post-HTB2 high-LTV market is imperative.
The Government can do this by giving the market greater clarity on what will follow and how issues like capital relief will be handled, plus of course how it may deliver a seamless transition from public to private mortgage insurance.
Judging by the figures, the longer we wait the greater the drop-off in high-LTV lending we are likely to see.
Pad Bamford, Genworth Financial
Proc fee issue is less about product bias and more about extra work
Last week, Mortgage Strategy’s cover feature asked if it was time for an overhaul of broker remuneration.
The reality is that this industry now has around 9,000 of the best and most professional individuals advising their clients in the right way, in the correct manner and with a decent ethos.
There has not been any recent evidence reported of product bias due to proc fee differences. The noise is more about the proc fee reflecting the higher value and depth of work the broker is now doing on the lender’s behalf, as well as the client’s.
It appears the quality message is creeping through as well, hence network participants can see higher fees due to the quality controls in place. This has also resulted in lenders paying higher proc fees for business from certain networks than from others.
As was pointed out in the Mortgage Strategy cover feature, the broker’s workload is no different when considering retention products – the market still has to be sourced as a whole and the research is no less onerous when the job is done correctly.
As yet, I have not studied the proc fee lists that are to be made available to consumers.
I cannot remember the last time I was asked for such information and I am sure it will be a while before I am asked again.
Chris Hulme, Clayton Hulme