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News Review: Property


Shaky AAA risks dampening property market by


Nigel Stockton, financial services director,


Countrywide


It’s been a pretty depressing month with the economy hit by a plethora of dire head- lines - record unemploy- ment figures, credit agency downgrades, pension woes, inflation falls and the ongo- ing threat of EU imploding to name just a few! Moody’s came in for a battering after switching their outlook for the UK from stable to nega- tive, with analysts quick to point out that the Bank of England’s latest money print- ing programme will have a bigger impact on the bond market than the views of a debt rating agency.


“While some have dismissed the UK rating downgrade, others do


concede that this is a warning that could impact the property market”


And the trouble with jour- nalists is that they have an unhelpful habit of digging up the past and remembering small details like the fact that it was Moody’s which failed to predict the credit crunch and gave the thumbs up to Lehm- an’s prior to its bankruptcy… and now Moody’s itself is now under investigation by the US Department for Justice


surrounding its alleged over- zealous sub-prime product recommendations. While some have dismissed


the UK rating downgrade, claiming the negative outlook amounts to little and puts us in good company with our AAA-rated contemporaries the US and France, others do concede that this is a warning that could impact the prop- erty market to at least some degree simply because pen- sion funds and investors can’t put money in places deemed to be at ‘risk’.


Interest-only Elsewhere Santander was in the firing line after news hit the press about their deci- sion to reduce the loan to value criteria for interest-only mortgages; a move which may have been prompted by the Mortgage Market Review rec- ommendations but will also improve their own funding and risk concerns. Santander isn’t alone of course, with Lloyds Banking Group and Barclays also amending their interest-only lending poli- cies but thankfully they have left their LTV policies un- changed. All this is bound to hit the remortgage market in 2012 – but let’s remember that remortgage business still represents around 30% of the overall market. I sincerely hope these decisions are re- lated to short term funding issues rather than a long term move.


LTV caps


Some could say that the tim- ing of this news was ironic as it coincided with reports that the Chancellor plans to give the Bank of England’s Fi-


8 MORTGAGE INTRODUCER MARCH 2012


Individual registration In other news this month I’m afraid that words fail me on the FSA’s decision to indefi- nitely delay its plans to intro-


nancial Policy Committee the power to control the LTVs imposed by lenders. This idea was dropped in the MMR and EU Directive but the Chancellor argues that these powers will be used to pre- vent any unsustainable house price increases in the future. I fail to understand why the regulator and politicians can- not get their framework right and then regulate accordingly without trying to design the actual products. It’s always a concern when political forces start focusing on the micro as it’s usually a sign that they’ve either taken their eye off the ball or are finding it impos- sible to cope with the macro issues that caused banks to crash, a legacy of which is impacting the market slump we’re experiencing today.


Longer holiday On the subject of house pric- es, as March’s deadline for the Stamp Duty holiday edges closer for properties valued up to £250,000, figures are now emerging on the num- ber of first-time buyers the exemption has helped, with 170,000 people said to have benefited over the past two years. Our views at Country- wide are clear – we think it is a mistake to end the holiday. With the latest government figures revealing that just 10% of homeowners are under the age of 35, many of us are hop- ing the Chancellor will have something up his sleeve in his March Budget.


duce individual registration for mortgage brokers. I think most of the industry is up in arms about this – well except for lenders of course – who have now escaped the cost and headache of individual registration. I’ll spare you a rant on my part but I had hoped the FSA would have put the needs of consumers first on this critical issue and used the MMR as an opportu- nity to create an even playing field.


“I think that the regulator should operate like the BBC and other public bodies limited to RPI increases on both fees and funding”


I do think the FSA should reconsider, surely this mea- sure would go some way to help stamp out industry fraud, which is a massive drain on FSA resources and no doubt represents a huge part of the compensation fund and fees we pay? Men- tioning fees, I’ve yet to see whether the FSA will revise their funding requirements – after their 18% increase this year (which represents just four times RPI) - now that the cost of individual registration has been negated...? Here’s an idea: I think that the regu- lator should operate like the BBC and other public bodies limited to RPI increases on both fees and funding… just a thought.


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