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The Lenders’ Perspective
Society for Licensed Conveyancers Annual Conference
Paul BroadheadHead of Mortgage Policy, Building Societies Association
12 November 2014
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1. The mortgage lending market
2. Mortgage Market Review – The first six months
3. The impact of Government Intervention- Funding for Lending- Help to Buy- FPC intervention
3. Mortgage Credit Directive
4. The consumer outlook
Contents
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Mortgage market in numbers
Gross lending, £ million
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2006 2007 2008 2009 2010 2011 2012 2013 2014(f)
Others
Other specialistlenders
Banks
Buildingsocieties/mutuals
f = BSA forecastSource Bank of England
4
Mortgage market in numbers
Net lending, £ million
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
80,000
100,000
120,000
2006 2007 2008 2009 2010 2011 2012 2013 2014(f)
Others
Otherspecialistlenders
Banks
Buildingsocieties/mutuals
f = BSA forecastSource Bank of England
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• The Mortgage Inquisition – could spell the end of cheap fixed rates- Daily mail
• The rise and fall of interest-only mortgages- Citywire
• Now a bikini wax can cost you your house- Daily Mail
• Mortgage prisoners are locked into home loans- BBC News
MMR – The warnings
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• Affordability changes- Some oddities early on but settling down
• Fully advised market- Appointment delays at large banks have provided opportunities for small lenders and intermediaries
• Post contractual variations- Some inconsistency of approach
• Transitional rules- Not widely used for “new” customers
MMR – The first six months reality
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FLS impact
Average Mortgage rates
3.56
3.37
3.00
3.50
4.00
4.50
5.00
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
2012 2013 2014
All providers Mutuals
Source: Moneyfacts
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Help to Buy – Equity Loan
• Help to Buy (1): equity loan Government scheme – applies to new build properties up to £600,000
Launched April 2013-33,911 properties bought to 30 September 2014
-84% of purchasers are First Time Buyers
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Help to Buy – Mortgage Guarantee• Help to Buy (2): mortgage
guaranteeGovernment offers lenders the option to purchase a guarantee on the loans they supply (above 80% LTV). Aim is that lenders will offer higher LTV mortgages up to 95%.
No Building Societies signed up
18, 564 mortgage completed in first 9 months of the scheme79% first time buyersLargest take up is outside London & the South East
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Financial Policy Committee
• LTI Limits- Arbitrary limits should be avoided- May not bite now but could drive consumers to other credit in the future
• Affordability Stress Tests- Market expections
- Any prevailing FPC recommendation (currently +3% on BBR at origination)
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MCD timeline
HM Treasury
• Published consultation on 5 September 2014.
• Closing date was 31 October 2014.• The UK government needs to make
changes to legislation• Aiming to finalise required measures by
March 2015• To achieve this, final legislation must
be laid in Parliament in early 2015.
FCA
Published consultation on 25 September 2014.Closing 29 December 2014Sets out proposed approach to implementing MCD – largely through reliance on existing rules.Aiming to publish final rules in a policy statement by the end of Q1 2015.
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No mention other than Credit Agreements beyond March 2016 are captured.
Seems appropriate to us that the definition should refer to the current, conditional mortgage offer.
These offers are robust and not routinely withdrawn.
Mortgage Credit DirectiveTransitional Arrangements
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MCD requires offer to be binding
FCA aim to make the process as simple as possible
7 day period to reflect
Customer has the right to withdraw
Conveyancing process has an additional step
Binding Offer7 day reflection period
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Barriers to property purchase
57%
46%45%
28%
12%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
Jun-
08S
ep-0
8D
ec-0
8M
ar-0
9Ju
n-09
Sep
-09
Dec
-09
Mar
-10
Jun-
10S
ep-1
0D
ec-1
0M
ar-1
1Ju
n-11
Sep
-11
Dec
-11
Mar
-12
Jun-
12S
ep-1
2D
ec-1
2M
ar-1
3Ju
n-13
Sep
-13
Dec
-13
Mar
-14
Jun-
14S
ep-1
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Raising a deposit
Affordability ofmonthly mortgagerepayments
Access tosufficientmortgage finance
Lack of jobsecurity
Concern aboutfuture falls inproperty prices