The mortgage market still needs a push forward not a pull back


October 7, 2013




Bob Hunt is Chief Executive of Paradigm Mortgage Services


If there is currently a clearer example than the mobile phone operator BlackBerry about how rapidly businesses and market conditions can change then I would challenge you to find it. Just five years ago BlackBerry had a market value of $83bn whereas now it is (apparently) going to be bought out by a consortium of Canadian investment companies for just $4.2bn in cash. This mega-fall in value is both eye-watering and would be absolutely startling to anyone viewing the business back in 2008.


However, times change and particularly in the technology space times change fast and if you’re not at the cutting edge then you are way behind the market leaders. Where once a BlackBerry was the mobile phone of choice it was soon usurped by newer models which could do everything a BlackBerry could do and then some. The company appeared to recognise this way too late and its last attempt at updating its operating system and handsets failed to set the market alight with this move being the result.


Looking at the situation with BlackBerry and its clear fall from grace we can clearly draw parallels (hopefully in the opposite direction) about the mortgage and property sectors. Back in 2008, following the run on Northern Rock, the collapse of Lehman’s, the subsequent credit crunch and recession there would probably have been many who only saw a very bleak future for our sector for years to come. Of course to some extent they would have been right given the time it has taken to generate any sort of forward momentum however one hopes that talk of a Japanese-style “lost decade” – at least in our sector – is wide of the mark.


There’s no doubting it has been a long and arduous slog to even get to a position where we have some kind of normality. This has involved considerable government and regulatory intervention in order to rebuild capital, bring in new standards for reserve holding, and (in our own part of UK plc) a number of new and ongoing initiatives in order to get lenders lending again. There has been much talk about whether Help to Buy 2 is a step too far in terms of helping the housing market however while the patient has shown steady signs of improvement during 2013 one wonders whether allowing them off the drip at this point is truly the best course of treatment.


There is probably not a housing/mortgage market stakeholder out there who does not recognise that, at some point in the future, (and to use another metaphor) the stabiliser wheels will have to be taken off the bike. We cannot continue to rely on government support indefinitely as this is not good for anyone and will certainly make the chances of a large tumble much more likely when the training wheels are removed. The fact is the market does need to ride alone without the helping hand of the state parent if we truly want to create a more balanced market which does not need to come cap in hand to the government every time there’s a wobble.


However, the positive news is that, unlike BlackBerry,  the UK’s housing market is, with plenty of help, showing itself to be in a much more positive place than at any time over the past five years. Even more so while many arch-sceptic commentators appear to want to put the brakes on before we get going my view is that we need to ensure the market continues to improve. We are a long way from a housing bubble and a long way from the transaction levels of a normal marketplace; we are clearly getting there but this does not mean we should prescribe total neglect. The market can still move quickly and there is nothing to say the next move will not be negative; to that end pushing forward and continuing the support appears to be a far better strategy than falling back and then attempting to play catch-up. It didn’t do BlackBerry any good and neither will it be the right direction for the UK housing market to travel.

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