News Review: Housing


Borrowers must get back in the habit


by Stephen Smith, director housing and external affairs, Legal & General


they say that once you have learned how to ride a bike, you never forget. i can’t claim to have tested this theory very recently, but i do know that the last time i did a serious bike ride (London to Brighton for the British Heart Foundation) it was some forty years after i had first learned to ride, and i still remembered how. What concerns me at


the moment though is that potential mortgage borrowers – perhaps quite understandably after four years of appalling headlines – have simply got out of the habit of borrowing. and introducers may have got out of the habit of introducing and advisers of advising. the reason i say this is


the feedback from lenders, and from a number of intermediaries, of


the


surprisingly slow take up of some of the lending that is actually available in the market now. in a discussion a few weeks


ago with some members of the intermediary mortgage Lenders


association


community it was clear that there are lenders with money to lend – with more flexible and open criteria


than they have had for some time – but without the flow of applications they might have expected.


General depression i wonder if the old message that used to be seen behind the bar at my local “please do not ask for credit as refusal often offends” has been taken too literally by consumers. and who can blame them?


the onset of the credit crisis from Q3 2008 saw a massive jump on the brakes by uK mortgage lenders. Loan to values offered by


all lenders who stayed in the market plummeted. nobody was lending at over 85% loan to value, and many were encouraging nothing but 75% and under. From one of our own estate


agency arrangements i know of a branch in the north where the mortgage broker in the upstairs office simply told the downstairs staff “don’t bother sending anyone up to see me unless they have at least a 20% deposit”. So are customers either


being told – by the press or by introducers – “don’t bother asking”?


Do the maths as part of some recent research in which we participated we found from a large, statistically meaningful sample, that only 44% of people already planned to go


to a broker during their next attempt to secure a mortgage. But 81% of borrowers


said that they would rather complete just one process that would cover a large proportion of the market – and this means using a mortgage broker. Brokers clearly have a job to do. other research, carried out


over the last couple of years by the association of mortgage intermediaries and aiFa, has also shown the savings that using a broker can achieve for consumers. So another part of the


message we need to get across is the availability and value of advice. Perhaps some cross industry initiatives need to be instigated to achieve this and individual advisory firms need to make more of what they do.


Value vs expense a further challenge is to get across to prospective borrowers that today’s deals do represent good value for money. many people in our industry will remember lender standard variable rates at over 15%, with LiBor linked rates well above that. many will remember the 25- year fixed rate offered by Bear Sterns Homeloans at, i believe 11.25% - and that seemed like a good deal at the time. So,


today’s first-time


buyer deals at around 6% do represent good value for


money, relative to the long- term trend level. Yes, it seems expensive compared to Bank base rate, and compared to some of the base rate linked deals that many lucky customers are on, but the game has changed. it has changed in that


lenders now, finally price for risk – albeit in a somewhat crude way based on loan to value. and it has changed in that bank base rate is no longer any sort of proxy for what it costs lenders to raise retail deposits to fund their lending. nor is 3-month LiBor for that matter.


Encourage positive thinking rather than get depressed by looking at the negative news stories, perhaps we should be focusing our thoughts on some of the positive stories we now have. the recent cmL re-forecast


for gross lending (and hence activity in our market) is now for £140bn of lending in 2011. up from last year. the corner has been turned, and whilst the recovery will be long and slow, we are at least moving in the right direction. So let’s get back in the


habit of advising and lending. Let’s get our lead sources, our introducers fired up to believe that making a referral is fully worthwhile. and at every opportunity let’s tell customers that there is money available.


Fast-building a reputation as the home for BTL.


Aldermore. Making your BTL clients feel more at home.


12 mortgage introducer JULY 2011


Whatever the Bank of England’s decision on base rates. Aldermore has it covered with a full range of variable and fixed BTL mortgages. And as you’d expect, all our products are based on refreshingly sensible underwriting rules and criteria.


0333 3211000 aldermore-mortgages.co.uk


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