Mortgage Strategy

COMMENT

I’m going to try harder than ever this week to think positive thoughts. I know this is somewhat out of character but here goes with all the latest mortgage industry good news I can find. It was definitely good to see the announcement that mortgage lending increased by 16% in March. Gross mortgage lending was an estimated £11.5bn in March, compared with £9.9bn in February, according to the Council of Mortgage Lenders. Gross lending for Q1 2009 was

‘‘

an estimated £33bn, a 29% fall from Q4 of 2008 and the lowest quarterly lending total since Q1 of 2001. A seasonal fall of 10% is usually experienced between Q4 and Q1, so the good news once again is that the 16% rise is broadly within the CML’s anticipated £145bn in gross lending for this year. It was also pleasing to see that registrations by prospective buyers at estate agents rose by more than 12% in the same month, giving each agent in the country an average hit list of 268 potential customers. There was a small ray of sunshine in the Budget with the extension of the Stamp Duty holiday until December and £500m extra funding to improve housing stock. It was also good to hear that Northern Rock’s gross lending totalled £550m in the first three months of this year, with an increase in applications of 70% from February to March. The lender also reduced its government loan by £1bn in the same period. My own network, Pink Home Loans, has become one of the first in the country to have permissions granted by the FSA to cover Islamic

24

At last there’s some good news in the industry

SUE READ ASSOCIATE MONEYWATCH FINANCE

The rise in mortgage lending, increasing buyer interest and Stamp Duty holiday extension are small messages of hope

Let’s hope the FSA continues to act decisively and strongly so this sort of practice disappears

mortgages. This is an oft-ignored business area for mainstream advisers and networks and I hope it proves successful. Such a move should also encourage us all to think about a wider business picture in future. The final piece of good news was to hear that the FSA has at last stepped in and stopped Network Data from trading. For far too long we have heard tales of advisers being owed money and people going out of business as a result. I understand that the FSA has to take a view on many matters that necessitates a seemingly slow and

often soft approach. But as with recent actions against advisers let’s hope it continues to act decisively and strongly so this sort of practice disappears once and for all.

Some of this good news is, to my mind, pretty thin. The extension of the Stamp Duty threshold increase will have only a limited effect and could have the opposite effect to that intended. After all, if you believed you only had another six months to save money rather than nine months, wouldn’t you get a move on? It’s not tremendous or earth-shattering but at least there are some small messages of hope starting to filter through.

You won’t be surprised to hear that we are keeping a close eye on the financial condition of networks. In challenging times the bread and butter work of networks, such as maintaining cash flow and

monitoring ‘‘ appointed representatives, comes under pressure. It is essential that networks ensure they know what is going on with their ARs. I have experienced the challenges of offices in different locations – we have one in London and one in Edinburgh – but networks, often responsible for ARs in many locations, face this on a far greater scale. We expect principals, as the authorised firm, to know their business and take responsibility for all of it as they have to answer for the sales their ARs make. They need to make sure advisers know what they are doing and what’s going on behind the scenes such as cash flow through the network and that training and competence schemes are working properly. All this means having the right procedures to monitor and control their business. It is particularly important for principal firms to produce and make effective use of management information to identify trends and manage risks to the network’s firms and customers. This means not only acting on particular information, but also regularly reviewing management information to make sure what is produced and collated gives enough information to monitor the business effectively and deal with issues proactively. Above all, principal firms need sufficient evidence to satisfy themselves that ARs are offering sound advice and treating customers fairly.

www.mortgagestrategy.co.uk

Networks must keep up strict AR supervision

LESLEY TITCOMB MORTGAGE SECTOR LEADER FINANCIAL SERVICES AUTHORITY

Principals must keep a close eye on ARs even in these tough times as they are responsible for anything that goes wrong

Networks taking on new firms need to be able to identify and manage any risks and issues that expansion will bring. One thing to get right from the start is clear reporting lines and information flow, and defined roles and responsibilities between the

Another issue facing networks is maintaining cash flow but cost-cutting needs careful consideration

principal and its ARs. We are watchful for potential phoenix firms emerging and principal firms need to be vigilant against those that may see joining a network as an AR as a way of getting back into the industry after leaving behind liabilities in their previous guise. Another issue in the current market conditions is maintaining cash flow. It is likely most networks are looking at cutting costs where they can. While this is an understandable response to a difficult trading environment, it needs careful consideration as blanket cost-cutting will likely bring additional risks. A better approach is to identify the benefits and risks of cuts and make only those that leave the business financially viable in the long term and with key staff still in place. Losing staff with the skills and experience to monitor ARs and ensure they remain competent and financially stable will make it more difficult for the network to meet its regulatory responsibilities. Principal firms have a lot on their plate and some are expanding to take on more. Ultimately, the principles of good business practice, robust systems and controls and keeping the right people in the right roles will help them during this difficult time.

MORTGAGE STRATEGY May 4, 2009

To view a Ceros magazine you need to have JavaScript enabled in your browser and have the flash player 8 or higher installed. To install the latest flash player, click the icon above, install the flash plugin and then click here to refresh this page.
If you believe you have the correct requirements please click here to skip our detection.