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SPECIAL FEATURE: What we thought of 2010

Robyn Hall

January 11, 2011

Today, Tony Ward, chief executive of Home Funding, shares his thoughts and opinions.

“The year 2010 started with funding issues and at the end of 2010 funding was still the biggest barrier to a healthy economy, housing and mortgage market re-emerging.

However we did see some positive changes during 2010.

We didn’t see any return to volatile banking markets – they have been much more in control and stable. Having said that, the funding and liquidity support will need repaying during the next two years and I’m not sure how this will be achieved.

We also had the drama of a General Election and the appointment of a Coalition Government that seems to be holding together. Who would have thought this was possible?

Swiftly followed of course by the Spending Review. I predict now that the effects of this will wash through the economy and be with us for many years to come now.

The economy was a bit of a rollercoaster in 2010. Will we or won’t we have a double dip recession has been the focus of many and although more recently it has been felt that the UK is doing the right thing and that tough austerity measures are being pushed through, we should escape the dreaded double dip. Well it’s just too early to tell in my view so we should still be prepared to batten down the hatches and navigate into a potentially choppy 2011. The market remains fragile.

And we have seen some re-emergence of funding deals with a whole slew of securitisations issued by large lenders following the lead of Lloyds Bank. We have even seen some warehouse funding being made available with Paragon recommencing buy to let lending on the back of their Macquarie funding line. Also Precise have managed to secure a new FSA lending permission – no mean feat – and a funding line. Kensington are back out there and new kids on the block include Aldermore, the newly re-badged Ruffler Bank.

Good for all of us in the long term but we are not back to the good old days yet by a long way.

The mortgage market certainly seems to have been obsessed with regulation throughout 2010.

The MMR was published in October 2009and with consultation papers being issued during 2010 it managed to remain at or near centre stage throughout with much gnashing of teeth by the industry and strong views all round. At this stage it isn’t clear where this will come out and as I write this, the latest plea from the industry is that the MMR needs reworking and re-consulting as the FSA thinking and impact analysis is deemed by the industry to be flawed. Who knows where this will lead in 2011?

My view is that whilst the FSA proposed changes, if set in place, will not make things easier (and it feels like we all deserve a break at this point), they aren’t terminal.

Indeed there are quite a few things in the MMR that would be hard to dispute in the long term. The industry will argue that it has self-regulated and has learned its lessons from the downturn. I guess the only test of that will be over time and through a full cycle. Will lenders be more prudent and risk averse when the economy is booming again? The FSA clearly don’t think they can trust us to exercise restraint in the future.

In a way I think it’s sad that regulation has deflected attention away from the funding and liquidity focus because as I stated at the beginning of this article, that remains the biggest issue.

I look forward to the Government making their housing policy clear for 2011 and beyond. At the moment they say that it is their policy to increase the number of houses available to buy and rent, including affordable housing and to make sure that homes are of high quality and sustainable.

All well and good but where exactly is that funding coming from?”


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