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News
News review
A look at the major issues of the month
by Nia Williams
N
ext month sees the beginning of neither affect demand nor avoid asset price circle6 Arrears and possessions; to determine how
the much discussed FSA bubbles - we need more sophisticated many are caused by unemployment,
consultation into mortgage market models such as the loan to average illness, divorce, other family emergencies
regulation, first announced by FSA household disposable incomes ratio and how many by over-borrowing on the
Chairman, Lord Turner, in May. There’s Commenting on it, Robert Sinclair,
already been much rumour and director of AMI, said: "In May, Lord Turner circle6
part of the mortgagees
Mortgage equity withdrawal; to evaluate
speculation over what the consultation will set out a number of areas that he felt the how much was withdrawn by the over-
involve and the outcome but this month regulator should review. We look forward to fifties to supplement income; by other age
saw the Association of Mortgage the full consultation paper in October, but groups and for what purpose; and finally,
Intermediaries (AMI) urging caution on we urge caution before the FSA introduces what proportion of those taking equity out
the part of the Financial Services unnecessary regulation that is unlikely to of their homes have been able to manage
Authority (FSA) as it considers have the desired effect on the UK market. the increased loans without difficulty
introducing new mortgage regulation. "If the FSA and the Government wish to The debate will no doubt continue long
AMI's latest report, ‘The UK Mortgage exert greater control over house prices, after the consultation begins. We’ll keep you
Market - a comparative study reflecting US product regulation is not the answer. The posted on mortgageintroducer.com.
and European influences' - questions growth in house prices is impacted by a wide Another issue that has been fiercely
whether regulatory actions or inactions had range of macro-economic policies or more debated over the past couple of years is that
the required effect in the UK over the last 5 specific government policies, such as of direct products. The August TrigoldCrystal
years. Instead, AMI argues that developments reducing the availability of social housing or Product Index constructed from data from
in the UK are the result of a wide range of removing the restrictions on the supply of their mortgage sourcing system in July has
other factors including macro-economic new housing units, whether new build or the revealed that, for the fourth month in a row,
policy that produced similar trends in other adaptation of existing buildings or land use. the number of direct products available to
countries with vastly different regulatory "There were fundamental differences consumers have increased. The figures show
regimes. between the UK and US mortgage markets. the number rising to 1,240 - a rise of 10%
The report was drafted by Dr Oonagh US non-prime lending peaked at about 32 since May.
McDonald CBE, former MP, Treasury per cent of their market, while in the UK it Worryingly, the average number of live
spokesperson and FSA Director. AMI's paper did not get above 12 per cent of mortgage products available to mortgage
is intended to inform the FSA consultation lending. In addition the ‘originate to intermediaries fell from 2,610 in June to
into mortgage market regulation starting in distribute' model was the fundamental 2,202 in July – a reduction of 408 individual
October. structure through Freddie Mac and Fannie products and a drop of 6%. Unsurprisingly,
circle6
It highlighted key points including: May, while in the UK it was a much smaller the data for year on year analysis shows that
Sources of problems in the US market proportion of the market. mortgage product availability was
circle6
were not replicated in the UK "Our report shows that basing significantly lower than previous years.
House prices in the UK are affected by assumptions on ratios of mortgages to rents, Previous stats reveal product numbers to be
demand and a lack of supply much more loan to average income, or mortgage 13,464 in July 2008 and 64,803 in July 2007.
circle6
so than elsewhere payment to income ratios are inadequate There are positives to be seen in the
House price bubbles are not caused by lax measures. The more appropriate measure is market. The results do still show that over
circle6
lending the loan to average disposable income, 670,000 mortgage sources were performed by
Limiting the supply of funds or the price preferably on the basis of household income, brokers during July and, of course, there are
of those funds is likely to deflate prices taking into account the growth of two earner the seasonal factors as well. However, the
temporarily, but is only an artificial households, sometimes with rapidly direct issue continues to affect those of you
constraint and will create the next bubble increasing anticipated income and job who don’t charge a fee for your services.
circle6
when the supply of funds improves security." Is it enough to change your mind on the
Applying Loan-To-Value ratios as a AMI has called for further empirical way you do business? Let me know at
product control is not appropriate and will research by FSA in the following areas: Nia@thepublishinggroup.co.uk.
September 2009 Mortgage Introducer www.mortgageintroducer.com
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