When is it going to get easier?

When is it going to get easier?

In the true spirit of optimism we always think things are going to get better. 2009 was an annus horribilis in terms of mortgage volume. 2010 was supposed to be 10% or so better. Well if you had bet on this I think you ought to try to hedge now. As it looks rather like gross lending may even be lower than last year. It is hard to be cheerful about 2011's prospects when the majority of the volume lenders are nervously eyeing the end of the government's Credit Guarantee Scheme and the Special Liquidity Scheme when the government won't accept the lenders "IOU" vouchers any more.

Once you've got over digesting that then it is worth considering the Mortgage Market Review, clearly from a regulatory aspect things are going to be more challenging. We've also got to get to grips with a new approved persons regime. So is it time to pack our bags? Well if you read the comments sections on most of the bad news stories on Mortgage Introducer and other trade press web site, you don't need to bother as a large number of industry colleagues are already doing this. Undoubtedly some people won't make it through the approved persons regime but I think the suggestions that this could be 20% plus of the industry as exaggerated. The number of drops out will be significantly lower, maybe 5-10%. The fact that lenders will have to put all of their advisers through the approved persons regime and the fact that FSA scrutiny remains on non advised sales mean that it will be more expensive for lenders to distribute loans directly so the numbers of direct staff will reduce. So the thing to remember is that if people are leaving the industry, there are fewer advisers serving the greater public. Whatever lenders do with dual pricing, the public wants advice so they will seek brokers. We just have to hope that lending falls by less than adviser numbers. Whilst I don't think HSBC will embrace intermediaries in the short term, I think it will slow down its mortgage ambitions over the next couple of years. Whilst other lenders huff and puff I seriously doubt any of the major intermediary lenders will stop dealing with brokers. The MMR's more onerous requirements may push lenders to reduce the number of intermediaries they deal with. This will make the life of the small DA broker even harder. So the next time you think, "is this all worth it?" just remember everyone else is having the same thought and a good few people will think "no", so in time that should make your life easier.

Working together

There seems to be a popular misconception that if the Conservatives win the election then a few days later the lights will be switched off at the FSA building and we will be able to carry on working without its interference. Whilst after Nick Cleggs's stellar performance on last weeks televised part leaders debate the chances of a Tory victory went down slightly we need to set out our expectations at a realistic level. Even if David Cameron and his growing family walk through the door of their new home in Downing Street sometime after 6^th May, we will be working with the FSA for the foreseeable future.

The problem that the FSA has is that it is stuck in the middle of a terrible mess, it gets blamed by everyone for everything. The credit crunch and thus the recession, house price increases and subsequent falls, allowing self cert and then proposing its scrapped, bank bonuses etc. the list just goes on and on. At the moment it is between a rock and a hard place on lending. Reading its response to the MMR it isn't keen on individual product regulation, maximum LTVs and LTIs, however our politicians, keen to blame mortgages for the credit crunch, seem hell bent on bringing in as much product regulation as possible. Northern Rock's Together mortgages are, according to some, the root of all evil but if you take Northern Rock's cumulative losses on these mortgages then it's a drop in the ocean compared with RBS losses on the purchase of ABN Amro and HBoS's mainly property linked corporate losses. Product regulation is not the answer and is a slippery slope and to its credit the FSA realises this and is doing its best to resist.

I think in the mortgage industry our greatest problem has been a lack of understanding between the intermediary sector and the FSA, however this is not a result of any deficiency of the work of AMI which does a great job of representing us. Sadly trade bodies are quite happy to point the finger at brokers and say "its all their fault". The good news is that the FSA has realised that it needs to engage with brokers and is keen on undoing the damage. The small firms section of the FSA's website is very simple and easy to use. People like Lesley Titcomb are very accessible and keen to engage and despite the reception she got at last years Expo, she still comes out to speak at broker events where she and her colleagues welcome feedback. We are all very critical of the FSA when it adds staff numbers to its already substantial team however it has been trying very hard to recruit from the broker industry. I know at least one broker who has gone there and another who joined from AMI. The FSA has been running adverts on trade press web sites to try to attract more brokers. If it really thought brokers were the cockroaches of the industry and something to be exterminated it wouldn't bother. It would simply recruit from the vast pool of unemployed graduates. By recruiting former brokers it shows it is putting its (or rather formerly our) money where its mouth it. The more brokers who work there the better the understanding it will have of us.

We need to accept that things will never go back to the way they were. Light touch regulation is as dead as a dodo. Heavy blunt and invasive regulation is going to be the way forwards. If we sit back and throw rocks at the FSA and carry on with the Millwall mentality of "we're brokers, no one likes us but we don't care" then our jobs are going to be a lot harder as the regulation which will be imposed will not only be heavy, blunt and invasive but it will also be impractical. If we take the view that we need to continue to fight for our industry and that we need all the friends we can get, the closer we work with the FSA, the more honest and constructive our feedback is, the more workable the regulation will be. The FSA knows it isn't perfect but it has shown it wants to work with us so we need to meet it halfway.

Mortgage chicken..

No one will be surprised by the news that the MPC has kept the base rate on hold at 0.5% for the 11th consecutive month. Whilst borrowers with tracker mortgages will be delighted to see the bank rate remain untouched, those borrowers sitting on their lenders standard variable rate will be keeping a close eye on their letterbox. In the past month we have seen Skipton and recently Norwich and Peterborough increase their SVRs. With building societies struggling for funds, I doubt these will be the last SVR increases we will see. Borrowers on other lenders SVRs face a financial version of chicken as they sit tight on a nice low rate hoping they will be able to remortgage away at the last minute before they get hit by rate rises.
With more and more borrowers considering remortgaging, one important area to note is that any increase in remortgage volumes will reduce funding for purchases, as overall mortgage funding is so tightly constrained, any reduction in the volumes of funding for purchases is likely to have a negative impact on house prices.