The Bigger Issue


From Approved Persons requirements


the FSA, what is the main issue for the Each month Mortgage Introducer takes a look at the bigger issues. This mo


I dare say there are a fair few of you who have heard me make this point once or twice before but I consider the main issue for the mortgage market today to be the general lack of liquidity. Recently Shelter, the housing charity, warned that the lack of mortgage availability has resulted in many first-time buyers being forced to stay at home with their parents because they cannot afford the larger deposits now required by lenders. Not really surprising. Financial institutions can largely cherry pick the loan types they do want with the limited funding they have available. And why wouldn’t they do that? We continue to see a shortfall of funding for mortgage finance. This can be evidenced by


the lack of mortgage lending entities active on the markets, reduced from 180 in 2007 to


certainly less than a dozen today and probably only six or seven providing by far the majority of new lending. Virtually no non-bank lenders are active today (Kensington Mortgages and new lender Precise have just commenced lending in a limited way) and small to medium sized building societies are severely restricted. Total residential mortgage product numbers have been a key indicator since the onset of the financial crisis in August 2007. Available mortgage product numbers hit its peak of 15,559 in July 2007 with the lowest point coming in April 2009 when only 1,209 products where available. Whilst it is encouraging that total product supply is increasingly modestly it is still only at less than 15% of the numbers at the peak with little being available in the high LTV bands or credit impaired market despite an increase in customer demand during that time. There are schemes and incentives that currently exist, for example the oddly named Discount Window Facility, that could be extended and widened out from assisting the larger banks to helping the non-banks and to be made available on a committed permanent basis rather than just for short term funding glitches in the Money Markets. This could underpin liquidity in the markets and restore investor confidence and promote liquidity and therefore funding availability.


Tony Ward,


chief executive, Homefunding


Does somebody who has missed a couple of credit card payments deserve access to mortgage finance to enable them to buy a home? Should they even be trusted to purchase a property? How about somebody who is self-employed and hard working, but has irregular income? Or those with small deposits?


Judging by the recent behaviour of the UK’s financial


regulators, the answer is no, and those potential borrowers classed as ‘non-prime’ are certainly being under-served by the mortgage market. Paragon research shows that just over three quarters of


brokers’ mortgage business in the first quarter of this year was made up of prime residential mortgages, with the rest consisting of either buy-to-let or commercial loans. The level of non-conforming business was minimal. Whilst we never want to return to the dark days of ‘liar loans’ and poor lending, large swathes of the UK population cannot continue to be ignored because they do not fit lenders’ narrow bands of acceptance. The mortgage market has been one of the great political punchbags of the credit crunch. Politicians keen to be seen ‘doing something’ about the downturn picked on the one area where the banks had actually performed pretty well. Mortgage arrears have been low and steady for a number of years and the number of repossessions has been far lower during this past recession than in the early 1990s. However, a central point in the FSA’s Mortgage Market Review was that there are large sectors of the population who should not qualify for a mortgage and that the mortgage market blew up because lenders failed to adequately recognise this.


So, we now face a number of important questions. How long will it take before we recognise that the response to the credit crunch is overdone? And how long will it be before we are prepared to recognise the legitimate ambitions of those with some level of adverse credit, those who require high loan-to- values and those on irregular incomes?


John Heron, managing director, Paragon Mortgages


Our experts have had their say, now it’s your turn to have yours. Visit www.mortgageintroducer.com and vote for the expert you think makes most 18 mortgAgE introducEr JULY 2010


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