TW: Everyone focused on the SAM which was an equity release lookalike but it was available to everyone including first-time buyers. It was quite a broadly based product. GS: We still need some trusted names behind those types of schemes. SE: The equity market use to be a lot bigger and now there are really only two players in the whole market. Its nuts because the likes of Prudential, Legal & General should be in that market.
Would abolishing stamP duty for all ProPerties under £250,000 make a difference? TW: Every time we look at these things, we’re ferreting around in the undergrowth saying we can tweak little things here and there and it’ll make a difference. Where we started was at the macroeconomic and global structural issues which are causing the problems. Until you fix those problems, you can tweak things but you’re not really addressing anything. Even Bank of England governor Mervyn King says that after the bailout not a lot has happened. RT: Stamp duty exemption for first-time buyers we have in place until March next year. It’s a marginal thing but really it is a macro situation we need to talk about. I have got very bored with the stamp duty discussion. FE: It doesn’t do anything to the long term structure and if anything it makes things more distorted. It’ll factor in to house prices, there’ll be a short-term lift in demand and it’ll sink again.
banks are having to shore uP balance sheets and many are selling assets to achieve that. hoW Will this affect neW lending?
AC: My own personal view is that if there’s someone losing money, it means someone somewhere is finding an opportunity in it. The banks are having problems with Brussels and domestic regulators and their balance sheets are too big. Even if they all stop lending, it’s not going to make their balance sheets any smaller because no one is paying off their mortgage anyway. The next stage is that other money needs to step in. There are other markets now starting to open up lending to good customers that the banks are now unable or unwilling to deal with such as bridging. TW: On a positive note if you’re a bank and you’ve got these massive capital constraints, you’ve got to do something with your balance sheet. Lending money is a bank’s business and you can’t just stop so one of those things you could do is look at those receptors and look at whether a risk adjusted capital basis is much more capital efficient. Residential mortgage lending and investing in AAA and AA mortgage backed securities and
bonds are amongst those. They are things that you would want to do in preference to lending to large or small corporates and house builders.
do you mean neW lending in residential mortgages or do you mean buying books and investing in residential mortgages that Way?
AC: It could be either. SE: If you buy books then it releases capital for the lenders to do new lending. TW: I think it’ll be both. Although Paragon aren’t a bank they can borrow AAA securities at 2.75% over Libor, but if you look at their wider margins if you look at their buy-to-let, they’re AAA funding costs versus buy-to-let lending rates, half a per cent over Standard Variable Rate or whatever it is they lend at, they’re making bigger margins than they were four or five years ago. So there are opportunities in the new lending market.
Join the debate @mortgagechat mortgage introducer DECEMBER 2011 39
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