Mortgage market unfriendly to “nightmare” mates mortgages


mortgage intermediaries have reacted to housing min- ister grant Shapps proposed idea of “mates mortgages” with troubled concern. Last month John malone,


chairman at PmS, branded Shapps’ scheme as a “night- mare” and challenged the housing minister to answer whether he would take one. malone said: “mates mort-


gages will be an absolute nightmare when buyers try to extricate themselves from legally binding contracts. i’d like to know whether mr Shapps would consider get- ting one. “People’s circumstances


change in a very a short pe- riod of time and if you have a group of friends unequally committed it’ll be a night- mare if one person loses their job for instance. You have to be so, so sure about people’s


Shadow or shade


by Robert Sinclair director AMI


the shadow of eurozone debt is going to hang over the capacity of the main uK lenders for some time to come. Sovereign default, the risk of a domino effect and the potential impact on the balance sheets of debt holding banks is still seen as a significant on-going risk. the recent stress tests did


not measure the impacts of such an outcome although


circumstances and their fu- ture circumstances. “What if after a year one


person wants to move out of the shared house and in with their partner?” in early July Shapps said


banks should offer “mates mortgages” to help groups of friends buy a home together at the second first-time buyer summit. He said: “if there are mates


who are perfectly capable of paying monthly mortgage payments but are struggling to fund a deposit of their own, there should be straightfor- ward options to unite with their friends and take the first step on to the housing ladder together.” But brokers other than


malone were sceptical. david Hollingworth, head


of communications at Lon- don & county, said: “the


most commentators accept the inevitability of greek default. domestically the economy


continues to show mixed messages with employment growing, combined with hardening long-term unem- ployment. there is much anecdotal


evidence of part-time work supplanting permanent roles. With economic growth anaemic, inflation on the decline, there is little sign of any increase in bank base rate in the next 12 months. However swap and inter-


bank rates are also soften- ing, giving some interesting pricing points. Lenders are now com-


peting for volume in a way not seen since 2007, with innovation returning against


proposal is absolutely full of risks. People get into enough strife when they rent a flat to- gether over basic things like “who finished off the milk?” and “who is going to do the washing up?” it will be even worse if they have a mortgage to fight over.” melanie Bien, director of


communications at Private Finance, added: “it is one thing to rent with friends, which is traumatic enough, let alone to get a mortgage with them.” Britannia is one of a small


number of lenders that al- lows up to four friends to buy together through its Share to Buy scheme. However, just 1,300 borrowers have taken out such a loan making the appetite for a “mates mort- gages” plan questionable. Following malone’s chal- lenge Shapps said: “i’m de-


a backdrop of the regulator still exercised by mortgage fraud. What is as much a solici-


tor and valuer issue should not be pinned on the bro- ker’s back, and ami will be working to ensure fair play on this in coming months. However the delay to the


mortgage market review and the ongoing work in Brus- sels on the new mortgage directive also provides op- portunity. the Financial Services


authority continues to deliberate on the most ap- propriate remedies to apply to ensure a more robust and safer market. in contrast, the eu is


looking to break down barriers, promote competi-


lighted that progress has been made since the first summit i called to help first time buyers. more mortgage products are now available, and lenders, house builders and councils are cooperating better with each other to of- fer a range of options to pro- spective homeowners. “But much more still needs


to be done. “mates mortgag- es” are one option i would like to see explored. if there are mates who are perfectly capable of paying monthly mortgage payments but are struggling to fund a deposit on their own, there should be straightforward options to unite with their friends and take the first step onto the housing ladder together. “that’s why i have once


again called on key figures from across the housing mar- ket to come together.”


tion and protect consumers through ensuring higher standards of professional- ism and whole of market advice. Whilst it now looks as


though the “final rules” from both will come in the first half of 2012, who will be in the shade of the other remains unclear. all signs are that whilst


the sun is out and demand for mortgages is improving, the need for lending lend- ers who want the customers we have is still the challenge. Brokers need to work


hard to match customers’ profiles to known lender criteria. explaining the difficulties in getting best buy rates has been and will remain part of the job.


mortgage introducer AUGUST 2011 5


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