The Lenders’ Perspective
Paul Broadhead
Head of Mortgage Policy
Building Societies Association
Agenda
• Mortgage finance supply
• Consumer barriers to home
purchase
• Developments in the market
The Mortgage Market
£bn
Gross lending, UK
400
350
345
300
250
277
200
291 288
254
221
150
100
363
160
120
205
176
144 135 141 145
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014f
Historical data: Bank of England, Forecasts: BSA
The Mortgage Market
£bn
Net lending, UK
120
110 108
100
101 101
91
80
79
60
54
40
41
41
20
0
12
8
10
10
11
17
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014f
Historical data: Bank of England, Forecasts: BSA
0%
-40%
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Consumer
Outlook
Now is a good time to buy property in the UK
60%
Agree
40%
40%
20%
26%
Net agreement
-20%
-14%
Disagree
-60%
Consumer
Demand
Major barriers to property purchase
Raising a deposit
70%
63%
60%
50%
46%
43%
40%
36%
30%
20%
12%
10%
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
0%
Affordability of
monthly mortgage
repayments
Access to
sufficient
mortgage finance
Lack of job
security
Concern about
future falls in
property prices
High LTV mortgage availability
FTB loans at 95%+ LTV
Num ber of products available
Other lenders
Mutual lenders
200
182 182
180
163 166
161
160
80
69
73
73
92
90
93
20.12.13
31.01.14
111
29.11.13
140
81
120
87 89
100
97
94
97
40
39
42
82
70
63
69
54
40
60
31
31
31
31
34
34
29
42
62
60
58
20
19
20
42
41
38
28.06.13
64
74
31.05.13
64
73
26.04.13
80
71
32
33
25.01.13
25.02.13
28.03.13
55
55
57
25.10.13
21.12.12
57
20.09.13
47
30.08.13
47
26.07.13
41
30.11.12
27.07.12
40
26.10.12
32
39
50
37
28.09.12
33
39
31.08.12
33
29.06.12
20
25.05.12
40
102 101
28.03.14
28.02.14
0
A nalysis o f M o neyfacts A nalyser data
27
/0
27 4 /2
/0 0
27 5 /2 12
/ 0
27 06 /2 12
/0 0
27 7 /2 12
/0 0
27 8 /2 12
/ 0
27 09 /2 12
/1 0
27 0 /2 12
/ 0
27 11 /2 12
/1 0
27 2 /2 12
/0 0
27 1 /2 12
/ 0
27 02 / 13
/0 2 0
27 3 /2 13
/ 0
27 04 /2 13
/0 0
27 5 /2 13
/0 0
27 6 /2 13
/0 0
27 7 /2 13
/0 0
27 8 /2 13
/ 0
27 09 /2 13
/1 0
27 0 /2 13
/ 0
27 11 /2 13
/1 0
27 2 /2 13
/0 0
27 1 /2 13
/ 0
27 02 / 14
/0 2 0
3 / 14
20
14
Low interest rates
4.80
4.60
4.40
4.00
3.40
Average mortgage rates
4.60
All providers
Mutuals
4.38
4.20
3.80
3.73
3.60
3.54
3.20
Source: Moneyfacts
Market Developments
•
Help to Buy: Equity Loan
•
Help to Buy: Mortgage guarantee
•
Right to Buy
•
Self Build
Help to buy: Equity Loan
•
•
•
•
•
Government provides equity loan up to
20% of property value
Interest free for 5 years
Repayable within 25 years or on sale of
property
Open to all buyers
Newly built properties only
Help to Buy: Equity Loan
•
•
•
•
A number of lenders have signed up
Over 15,000 reservations since April
launch
Gives developers confidence to build
High profile scheme
Help to Buy: Mortgage
Guarantee
•
•
•
•
•
Opened for Applications 7 October
Designed to increase lending to
borrowers with small deposits
Government will guarantee a portion of
lenders’ losses about 80% ltv for a fee
Open to all buyers
Open to all properties up to a value of
£600,000
Help to Buy: Mortgage
Guarantee
•
•
•
•
5 of the 6 largest lenders have joined
Designed to address market failure in
the provision of high ltv loans
Many mutuals already very active in this
sector though MIG, so will they benefit
from joining?
What about the unintended
consequences?
Help to Buy: Mortgage
Guarantee
•
•
•
•
•
Temporary intervention
So were Fannie Mae and Freddie Mac
Could there be a cliff effect upon exit?
Is it really needed?
It is vital to monitor the recovery of the
‘housing market patient’
MMR
•
•
•
•
•
All change from 26 April?
Assessing affordability
Stress testing
Advice
Supervision
AssocRICS
•
•
•
AssocRICS + valuer registration
scheme
A more specialised qualification –
not necessarily a bad thing
We need more valuers –
AssocRICS could help
Independent commission on
the valuation market
Initial recommendations:
• Lender should pay for the valuation
• Valuation-specific insurance
• Use of AVMs
• Withdrawing confetti letters
• Retaining copies of valuations
Independent commission on
the valuation market
Next steps:
• Conflicts of interest
• Professional indemnity insurance
• Instructions/terms of engagement
• Quality of valuations
Why lenders need valuers
now more than ever
•
•
•
•
•
Japanese Knotweed
HS2
Solar panels
Flooding
Self build
Any questions?
paul.broadhead@bsa.org.uk
020 7520 5917