Robert Sinclair is chief executive officer of AMI
In October I spent an hour creating a podcast with the UK Mortgage Prisoners Action Group.
What this brought home to me was the sheer variety of mortgages caught, the different circumstances of the consumers, and the complexity of events that had conspired to bring these people to the place they were now in.
Much of this was created in the heady days of 2005 to 2007, when the industry was in a crescendo of ‘anything you can do, I can do bigger’.
The hour was spent answering very direct questions about people’s circumstances and if they could be helped. For technical detail I was assisted by Andrew Montlake.
What was obvious was that people were very transparent about their issues. However, behind all of these cases there was not just a mortgage, but a family struggling to understand what their options might be, having to cope with costs they see as unfair, bringing up while families paying more than they should, and in some cases failing to put quality food on the table in order to keep the roof over their heads.
It was the Financial Conduct Authority’s (FCA) Mortgage Market Review (MMR) affordability rules that limited many of these people’s ability to move to a new lender.
The FCA’s decisions to shut down self certification, for a period demonise interest-only, and encourage detailed assessment of incomes and costs has tied these people up.
With the additional need for lenders to adhere to stress testing, this only compounded the position.
The great elephant in the room is the historical action of UK Treasury. Having acquired the mortgage book of failed lenders, the decision to sell them back to the market through UK Asset Resolution (UKAR), rather than keep them, was the Treasury’s.
It made the decision to sell to unregulated asset managers, and to optimise the price paid by the new owner for those on higher interest rates, without fully considering what this might mean for customers in the longer-term.
The Treasury therefore optimised the value forthe UK tax-payer at the price of the individual.
The FCA has produced modified affordability rules and lenders are now coming to market with propositions which will help some of those individuals, who will be written to over the next six weeks.
However, even best estimates indicate that this might help about 10% of the mortgage prisoner population.
While the government is spraying money at people like confetti, there are some who deserve a better fate than that delivered when they were sold to unregulated identities as a commodity.
The challenge for brokers is to do what you can to help find these mortgage prisoners a better lender, and the question to government: surely there is something you can do?
Pushing water uphill
The last seven months have been turbulent, with more challenging times to come. This is uncharted territory as there are no experts in government at attempting mass population control in a pandemic.
We see money being thrown at problems in a way never imagined. However, demand for houses and mortgages has never been stronger. House prices are robust, people are moving and builders are open for business. The housing market is open. Brokers are as busy as at any time in their lives.
However, the lending industry appears to be hiding behind the curtains. Lenders are limiting market capacity by avoiding higher loan-to-value (LTV) lending.
The service levels of some appear robust, but to call many atrocious would be kind, and their sudden product withdrawals continue to cause difficulty. AMI is engaged with UK Finance, BSA, IMLA and in direct discussions with lenders to voice these concerns.
There is little sign of sudden improvements, as too many appear to want to accept that they are doing all they can. But the roof is starting to leak.
The consumer press has spotted the falling base rates, lower swap rates and rising mortgage rates – not consumer friendly.
No low deposit loans are available for first-time buyers. Criteria are being hardened to limit approvals, but demand is still there. Brokers are just moving to the next lender on the list, but it is more expensive.
At a time of national emergency, lenders again risk looking like the villains of the piece.
These are firms under immense stress due to having to deliver remote working, but I am not sure that their most senior execs have their eye on this ball.
Both the Treasury and the FCA are aware and monitoring at this point, so action might be forced.
Intermediaries have been delivering great volumes of business, more of which needs individual underwriting due to changes in the economy. Lenders have funds to lend, but are having to limit volumes as they cannot process the amount of business available for them. Overall, not a great position.
For brokers, most days it feels like pushing water uphill – but that is what they do.
Some lenders need to fix their houses and get with the programme.