ANALYSIS
JAMES WATSON
SALES DIRECTOR
PAYMENTSHIELD
Remember 1974?
Professional football
matches were played
on Sundays for the first
time, the UK’s first McDonald’s
restaurant opened in south
London and Ali beat Foreman in
their famous rumble in the jungle.
Meanwhile, You won’t find
another fool like me by the New
Seekers topped the hit parade.
Today, that refrain could be
sung to home seekers by embittered
lenders as Council of Mortgage
Lenders figures show the number
of mortgages fell last year to its
lowest level since 1974. Just 516,000
mortgages were granted – down
49% on 2007.
It is becoming clear that lenders
are no longer interested in lending,
especially to first-time buyers, as
the average deposit required is now
In one of his first forays into
the politically charged world
of housing in the capital,
London mayor Boris Johnson
has presented a multimillion
pound plan to deliver 3,000
affordable homes to kick-start
his First Steps low-cost home
ownership initiative.
Some 500 so-called ‘intermediate
rent’ homes are planned, while
£93m is to be used to revitalise five
stalled developments. This could
ultimately see up to 7,500 new
homes built.
First Steps promotes a range of
products that are intended to help
more Londoners own property,
offering flexible alternatives to
expensive open market options. The
scheme is open to households
earning less than £72,000 per year.
Of course, nobody can criticise
the good intention of building more
14
Lenders must be
pressured to lend
more than 20%. Nor are they
interested in backing the broker
sector that supported them during
the good times.
A lot of best buy deals are
only available direct from lenders
and many brokers have had to pull
down their shutters for good.
But it’s time for the sector to
come out fighting. Brokers and
trade bodies should be lobbying to
put pressure on lenders to free up
some of the billions in taxpayers’
cash they have been given.
Now that the Bank of England
is injecting freshly printed cash
into the money markets it is
important banks are prevented
from hoarding this.
They should be forced to use
it to oil the wheels of finance and
the most important wheel is the
mortgage market.
London plan faces
tough challenges
NEIL JOHNSON
MORTGAGE POLICY ADVISER
BUILDING SOCIETIES ASSOCIATION
houses. One of the reasons
properties are so expensive is the
imbalance between supply and
demand so while achieving
Johnson’s ambitious targets may be
difficult, the sentiment is worthy of
support.
But with his enthusiasm for
affordable housing, Johnson is
making the mistake of many
politicians before him – promising
affordable housing makes good
headlines but delivering it is
another matter.
Few affordable housing schemes
have been successful. High costs,
the level of administration needed
and complicated distribution
arrangements mean that they have
been characterised by poor levels
of take-up and high default rates.
Overcoming these problems is
likely to be a tough challenge for
the mayor.
Good economic news is
still not forthcoming – at
least not in the headlines
of the national press.
The question is – in challenging
times such as these is it possible to
give consumers sound advice? The
simple answer is yes, but there are
big obstacles.
Businesses that may have
worked through difficult economic
conditions in the past are again
facing tough decisions and many
brokers are likely to be worried
about where their next client will
come from.
Meanwhile, consumers fear
rising interest rates and the lack of
availability of mortgage products.
Many are insecure about the
direction of the economy and their
families’ wellbeing.
These factors all create stress,
Last week two major
brokerages announced
that they had called in
administrators.
Some commentators will
undoubtedly interpret this as a
signal that the intermediary
market is doomed, but I do not
share this opinion.
In fact, I take the opposite view,
believing it shows that big is not
necessarily beautiful in the
mortgage market.
The bottom line is that
mortgage advice is a cottage
industry. I don’t mean that as a
criticism – it’s just a fact of life.
I don’t have the relevant
Financial Services Authority
statistics at my fingertips but of the
12,500 firms registered under the
old Mortgage Code Compliance
Board, around 11,200 had fewer
than three salespeople.
www.mortgagestrategy.co.uk
Website may help
stressed brokers
KEVIN FRIEND
STRATEGIC PARTNERSHIPS DIRECTOR
WWW.MORTGAGES.CO.UK
Small firms have the
edge in the crunch
NICK BAXTER
DIRECTOR
MORTGAGE PROMOTIONS
which can lead to poor decisions by
brokers and consumers.
It is well known that financial
concerns are at the heart of many
personal and business problems, so
why not take a look at a website
called Stressmanagement.co.uk?
This website provides practical
help in tackling destructive
emotions, thus reducing stress and
anxiety.
All too often we read articles
written by so-called experts
incorrectly forecasting the future.
Stressed brokers could find this
website a refreshing change.
If brokers are not able to sell
financial services products in the
current market, they might at least
be able to provide good free advice
to consumers, which will be
beneficial for their businesses in
the future.
Around 7,500 mortgage firms
were sole traders, many working
from home offices and seeing
clients in their homes.
There’s nothing wrong with this
situation. In fact, in today’s world I
believe small traders have the
advantage.
They don’t have massive
overheads so can easily cut their
costs to a bare minimum to ride out
the downturn and meanwhile, they
can do what they have always done
best – provide consumers with
excellent, personal and impartial
advice.
Small brokers must be
concerned about how long the
economic downturn will last – as
we all are – but in the present
market they are in the driving seat.
If they stay close to their
customers, their customers will
stay close to them.
MORTGAGE STRATEGY March 16, 2009
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