We’re not in 2008 anymore


January 9, 2014

Bob Hunt is chief executive of Paradigm Mortgage Services 

Last week a daily newsletter from Mortgage Introducer included quite possibly the most positive array of news stories you are likely to find all year, and this was just three days into 2014. 

Phrases such as ‘house price momentum’, ‘strong November figures’, ‘strong tenant demand’ and ‘market sentiment continues to rise’ all jumped off the screen and signalled that, to mis-quote The Wizard of Oz, ‘we’re not in 2008 anymore’. 

The story regarding ‘strong November figures’ certainly caught my eye given it was about the building society/mutual sector and its lending levels during that particular month and throughout 2013 as a whole. 

It would appear that last year did indeed represent a strong lending year for mutuals with net lending of £12.1bn (not including December) and gross lending of £37.5bn for the same period. 

Essentially, and without having seen the total figures for the year as a whole, it seems that mutuals lent approximately a third more in 2013 than they did in the year previously.

This is a considerable increase and one not to be sniffed at. For example, if the entire mortgage gross lending figures of 2013 improve by the same sort of amount in 2014 then we would be looking at a market in excess of £200bn. 

Indeed, as a percentage of total gross lending market share the sector has seen an improvement; again for the first 11 months of 2013 it was up to 23% having been 21% for the same period in 2012.

Therefore the mutual sector should certainly be applauded for its continued appetite to lend – one which has been a lifeline for many brokers and their clients since the early days of the Credit Crunch and the global recession. 

Indeed, this inclination to lend to certain types of borrowers – first-time buyers, those with low deposit levels, etc – when few others were willing to do so should not be overlooked by anyone. It was, and continues to be, a vitally important finance lifeline for those who had few other options to consider elsewhere.

The mutual sector’s support for first-timers in particular can once again be viewed in the latest statistics – for the same 11-month time period approximately one in three of all new loans from mutuals were made to first-time buyers. 29% of those loans were to individuals who had less than a 10% deposit to put down. 

One suspects that over the course of the last few years the mutual sector has done more than its fair share of ensuring first-time buyers were able to purchase that all-important first property, not forgetting the number of property chains that developed from this lending and kept our sector in business.

It is important as well that in these days where Help to Buy appears to dominate the low-deposit /equity landscape that many mutuals are able to actively compete with those lenders who part of the government’s scheme. It’s often alluded to, but perhaps not mentioned much in dispatches, that the mortgage guarantee offered by the government for Help to Buy is much more favourable to the bigger banks than it is to the building societies. 

Which is why you will have seen no building societies participating yet and many preferring to use private insurance arrangements or take the risk burden completely themselves. 

However, the importance of the low-deposit/equity borrower to societies remains and, if you are to take a look at the most competitive 95% LTV products available at present, then you will note that mutuals are often leading the way. 

Therefore it should be particularly pleasing for all mortgage market stakeholders – particularly the broker community – that we have a strengthening building society sector and one which is keen to maintain its competitive edge and lending growth over the months and years ahead. 

These lenders continue to help many borrowers and have long recognised the importance of supporting new blood onto the property ladder. I have no doubts that these lenders will continue to rise to the challenge, supporting brokers and their clients with innovative products, and will be looking forward to improving on their 2013 performance over the course of the next 12 months. And that is surely something for all of us to be positive about.

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