The Bigger Issue
The first coalition since WW II and tw
200 years but will the election result ha
Each month Mortgage Introducer takes a look at the bigger issues. This m
The 2010 election result gave the UK housing and mortgage markets the second best option – but only time will tell if this is good enough to rescue the economy. It looks like the FSA has been spared in one guise or another and it appears that the buy- to-let market is going to be hit hard by the CGT hike to 40%. Otherwise it’s much the same. The UK housing and mortgage market simply doesn’t appear on the politician’s radar screen. With all the attention on the macroeconomic issues such microeconomic focus is currently lacking – Housing Minister Grant Shapps won’t even be sitting in cabinet meetings. This is understandable to a degree when you remind yourself of the (debt) mountain to be climbed. In the City most are now already pricing in a UK Sovereign Debt downgrade from AAA to AA this year. It appears that the rating agencies were just waiting for the election result to begin the process of re- evaluating our position.
The only hope we have to get our markets back on their
feet is to attract investors back into the MBS market via securitisation. The sooner the public finances are stabilised the more attractive our economy will appear again. At least we can report some relatively good news on getting the MBS market re-opened (I’m not including the equivalent of private placements by LBG, Nationwide, Santander et al). A new framework to get securitisation back is slowly emerging and there is a good chance we may have something workable by year end (which would imply a 2011 - but still far more likely 2012 - timing).
Just as nobody believes the politicians at the moment, investors are just as wary of issuers (lenders) lifting their leg again. So the new rules of engagement have due diligence all over them. There will be a legal requirement for investors (buyers of MBS) to conduct their own due diligence pre-securitisation, monitor the asset post-purchase and continually check that lenders keep their 5% “skin in the game”. The election result hasn’t helped directly but rather indirectly – markets will be more inclined that the Tories will get there sooner than the other parties.
Michael Bolton,
European sales director, Clayton Euro Risk
Well, that was something of a damp squib of an election night! Every commentator in the media was focused on the lack of a decisive winner and the problems that brought for the country and especially the housing market. Home ownership is such a central facet of our culture and such a core element of the country’s overall financial environment that it is right and proper to look at the aftermath of the election with some trepidation. I’m sure I’m echoing the thoughts of many that what we need is clarity and what we’re left with is uncertainty. We can only hope that the Conservative Liberal coalition can deliver clear policies and a long-term commitment to economic recovery. We often speak about how important confidence is in the housing market and so any suggestion of a fragile alliance could still have a negative effect. As it is, this alliance does look fairly strong, at least for the time being. Stagnation can come about if homeowners, and more importantly prospective homeowners, are unwilling to commit to a purchase, choosing instead to adopt a wait and see stance. There may well be a slight dip in house prices if this is the case as supply outstrips demand whilst buyers, and in particular first time buyers, sit on their hands. Will homeowners look to trade up if there is uncertainty about the security of their job? Probably not. We are already witnessing a slight drop in prices and I worry that any extended period of uncertainly will only exacerbate this. What is clear for any new government is the need to reduce the national debt and to do this there will need to be some fairly severe cuts - the depth and speed of which have yet to be announced but are believed to be necessary by both the Conservatives and the Lib Dems. However, cuts at any level could result in a rise in unemployment thereby harming what little recovery we have seen and potentially pushing repossessions up.
Another untold consequence of our new hung parliament may be banks’ unwillingness to free up funds while uncertainly over long-term economic policy remains.
Marcus Radcliffe,
director, Gateway Surveyors
Our experts have had their say, now it’s your turn to have yours. Visit
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14 morTgage InTroducer JUNE 2010
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