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News Review


Beware there are turning tides the market over by


Robert Sinclair, director,


Association of Mortgage Intermediaries


As we spring towards sum- mer there is perhaps little to put a bounce in the step of the industry. Whilst the econ- omy appears to be avoiding lurching too seriously into recession,


unemployment


continues to rise. This is still not at damaging levels and as inflation comes under con- trol, it gives policy makers more options. Interest rates remain set to stay flat for the rest of the year, but base rate could be 1.5% by the end of 2013. This should not have that big an impact on broad- er funding rates, which are still disconnected from base rate. So gentle waves coming from that direction. Of more concern is what


we are seeing in lender be- haviour. The need to control and reshape balance sheets to ensure that the new capi- tal and liquidity rules can be met at the end of the year is causing a lot of pain. In ad- dition, the need of banks to


prove the value of their re- tail businesses means they are sweating as much value as they can out of these ex- pensive high street sites. Dual pricing is back un- til they again fail to deliver the flow of applications to completion. This is where brokers have real value. Ensuring the transaction completes is a core skill and asset. This will give some pretty high spring tides, risk- ing pain.


Last man standing One of the things that we saw in the last Budget was a Chancellor, the second most senior politician in the coun- try, having a real swing at us. For some time now I have been warning against the use of Stamp Duty avoidance schemes. George Osborne labelled these as aggressive tax planning and committed to aggressive counter mea- sures. Those advisers who have helped promote these schemes had better hope they have water-tight indem- nity insurance and contracts with those they partnered with. I fear that when the In- land Revenue comes knock-


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ing all the other “advisers” will have “gone missing” and the Financial Services Au- thority regulated broker will be the last one standing. In addition, we as a wider industry need to listen to this wake up call. I am all for product innovation and new market entrants. However I also carry 30 years of scep- ticism. If something is too good to be true, it usually is. If it is at the edges of “legal- ity”, should we be involved? It does us little credit to have been part of a process that has caused the Chancel- lor to slay two of the sacred cows of tax law, retrospection and avoidance. It has always been legitimate to avoid taxa- tion, by ordering your affairs in a specific way. However, creating artificial structures to deliberately not pay taxes is a boundary that should not be crossed. Some have been party to this and they may have to bear the conse- quences. This could be an avalanche of water for some.


Back to bridging Similarly I have been warn- ing of some bridging loan activity that is crossing reg-


ulatory boundaries. There is a real risk that a num- ber of firms are in breach of regulation. The FSA has been politely warning for months for firms to take care. I hope people are listening and thinking about this. If you don’t understand the boundaries and what makes a loan regulated then this is a risk. There is another element here. Although there is a regulator in our industry we should not be waiting for them to act. It is our responsibility to keep our own industry clean. There are some reputa- tions in our industry, who some follow as they would not knowingly do anything “wrong”. What I am worried about is that what may not be “wrong” today, may prove later to be very damaging. We need to ensure that in these very trying times we do not chase income at the expense of our reputation. As an in- dustry we may be in the last chance saloon when it comes to being allowed at the table to play. We need to ensure that this is one tide that does not do serious damage.


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