24 February 2010

Conference time: 0845hrs – 1630hrs

Background

The CML compile and publish a range of statistics on the UK housing and mortgage markets including key data on mortgage lending, arrears and possessions and market segments such as buy-to-let. This unparalleled knowledge and insight into the important role housing plays in the economy is the basis on which this conference programme is built.

The detailed content will help all organisations, not just lenders, operating within the world of housing. The content discussed will be crucial to understanding current and future housing market conditions.

Chaired by Sue Anderson, head of external affairs, Council of Mortgage Lenders

Expert speakers will include:

• Michael Coogan, Director General, Council of Mortgage Lenders
• Rt. Hon John Healey MP, Minister for Housing and Planning
• Peter Williams, housing consultant and Chairman, IMLA
• Steven Hall, director, KPMG
• Bob Pannell, head of research, Council of Mortgage Lenders
• John Stewart, director of economic affairs, Home Builders Federation
• Rob Thomas, senior policy adviser, Council of Mortgage Lenders

Delegates currently booked on include:

• Technical director, Allied Surveyors
• Head of sales, Halifax Intermediaries
• Head of product delivery, HBOS plc
• Team leader, housing regeneration and third sector team, HM Treasury
• Business project manager, Legal and General Assurance Society

Cost:

£275 for members (VAT exempt)
£325 for non-members (VAT exempt)

Our event fees remain highly competitive with prices for members and associates not having increased since January 2007

Location:

The Westbury Hotel, Bond Street, Mayfair, London, W1S 2YF

This event is open to press

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The latest Bank of England mortgage data published today confirms the likelihood that there may have been a “bunching” of house purchase transactions in December to beat the stamp duty concession deadline.The gross lending total of £13.4 bn in December 2009 was in line with the CML’s estimate (£13.5 bn) and seems to confirm the CML’s view that much activity was “rushed through” to beat the stamp duty deadline. Gross lending totalled £143.5 bn in 2009.

Net lending remains up from the near stagnation in the middle of the year. For 2009 as a whole net lending totalled £11.5 bn. This was the lowest level on record (back to 1987), but higher than the CML forecast of £8 bn. It was largely driven by the relative strength of house purchase activity, which picked up over the latter part of the year, and weak levels of repayments. The CML sees little if any evidence that households, in aggregate, are using low interest rates to pay down mortgage debt more quickly.

CML economist Paul Samter said:

“These figures confirm that the mortgage market ended 2009 in much better shape than it started, but it still looks like a slow haul back to meaningful levels of activity. It should be no surprise if January and February this year appear particularly slow, if we are correct in our view that many buyers rushed to beat the stamp duty concession deadline in December.”

Notes to editors

1. The December lending data is available from the Bank of England website.

Contact details

Name: Sue Anderson

Tel: 020 7438 8924

Email: sue.anderson@cml.org.uk

Name: Bernard Clarke

Tel: 020 7438 8923

Email: bernard.clarke@cml.org.uk

Name: Jayne Chichester

Tel: 020 7438 8922

Email: jayne.chichester@cml.org.uk

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Six individuals have been charged with offences in connection with a series of high value commercial mortgage frauds.  Following a hearing at City of London Magistrates’ Court the case has been sent to Southwark Crown Court for a preliminary hearing on 4 January 2010.

The investigation was referred to the Serious Fraud Office in March 2006 by West Midlands Police following a complaint from the Cheshire Building Society.

It is alleged that the defendants participated in a series of frauds whereby they dishonestly obtained loans from banks or building societies that were secured on six commercial investment properties. Each property was transferred between companies controlled by one of the defendants and his associates at highly inflated prices in a series of back to back transactions. On the basis of the grossly inflated prices, fraudulent valuations and forged leases, the defendants applied for and obtained mortgage advances totalling nearly £50 million.  The mortgages were quickly defaulted on and the lenders suffered significant losses.

Five individuals, Ian McGarry (d.o.b 10/05/69), Hardeep Sodhi (d.o.b 05/10/76), Fatema Patwa (d.o.b 20/02/62), Saghir Afzal (d.o.b 01/01/62) and Laurence Ferrigan (d.o.b 20/11/61) have been charged with offences of conspiracy to obtain a money transfer by deception and dishonestly obtaining a money transfer. Simon Lawrence (d.o.b 07/04/61) has been charged with conspiracy to obtain a money transfer by deception.

Notes

At the relevant time:

• Ian McGarry was a chartered surveyor at Dunlop Haywards Lorenz;
• Fatema Patwa was the sole principal of her own firm, Patwa Solicitors, based in Birmingham.
• Hardeep Sodhi was a solicitor employed at Patwa Solicitors in Birmingham.
• Laurence Ferrigan was a partner at The CFB Partnership, Wanstead, East London.
• Saghir Afzal was a company director and property owner.
• Simon Lawrence was a partner of Darlingtons Solicitors in, Edgware

Serious Fraud Office, Elm House, 10-16 Elm Street, London, WC1X 0BJ

Press Office tel: 020 7239 7001/7004 or mobile: 0781 807 6688

Main switchboard tel: 020 7239 7272

press.office@sfo.gsi.gov.uk – or via – www.sfo.gov.uk

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A recent study of more than 3,000 potential first time buyers reveals that 28 per cent feel they will need to save for at least five years before finally getting the keys to their own home.

One in 10 respondents have been saving for more than five years and still do not have enough deposit, while 30 per cent have no savings to put towards a deposit at all.

However, there is still help at hand, with new homes builder Stamford Homes offering its own incentives as well as Government shared equity schemes to get first time buyers onto the housing ladder.

These include;
Easystart where customers can own 100 per cent of a brand-new home for 80 per cent of the price with just five per deposit required.

HomeBuy Direct a Government home purchase scheme to help first time buyers onto the property ladder where you own 100 per cent of your home for just 70 per cent of the price, and just five per cent deposit required. This offer was to come to an end in March 2010 but has now been extended until September 2010 and has limited availability.

Stamp duty exemption on homes under £175,000. However, the Government’s exemption holiday ends on December 31.
Stamford Homes regional sales and marketing director Peter Bond said: “While the statistics by themselves do make fairly depressing reading, it is still encouraging that so many people are thinking about buying a home.

“There is evidence that many of our first time buyers have been able to afford their dream home through one of our many incentives schemes available across our developments.

“We recognise that raising a deposit does have its difficulties, but there are other scheme which can take away that pressure of the house buying process.”

For details of new homes around the region, visit www.stamford-homes.co.uk

- ENDS -

Notes to the Editor:
Stamford Homes operates throughout the East Midlands and Lincolnshire and forms a part of Galliford Try’s Housebuilding Division: Galliford Try Homes.
www.stamford-homes.co.uk

Galliford Try Homes operates through four strong regional brands: Linden Homes, Stamford Homes, Midas Homes, and Gerald Wood Homes specialising in brownfield development. The business is capable of developing over 3,000 homes per year, covering the entire region from the West Country to Lincolnshire and the South-East.
www.gallifordtryhomes.co.uk

For further information please contact:

Cetti Long
Media Matters PR
Stamford Homes
Tel: 01733 371363.
E-mail: cetti@mediamatters-pr.co.uk

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However, for potential buyers who are putting off moving until after Christmas, buying a brand new dream home is now easier, and less expensive, than you think.

Stamford Homes can help curb the cost of moving to many of its developments in and around the region – with savings and incentives to help customers make their money travel further.

Among the most popular are Stamford Homes’ own EasyStart scheme, and the Government’s shared equity HomeBuy Direct incentive.

Both of these are currently available on selected homes across the Midlands’ developments. However, as the HomeBuy Direct initiative – which has already helped numbers Stamford Homes customers to afford their dream home – comes to and end next September but has limited availability, so now is the time to act.

These include;
- Easystart where customers can own 100 per cent of a brand-new home for 80 per cent of the price with just five per deposit required.

- HomeBuy Direct a Government home purchase scheme to help first time buyers onto the property ladder where you own 100 per cent of your home for just 70 per cent of the price, and just five per cent deposit required. This offer has limited availability.

Stamford Homes regional sales and marketing director Peter Bond said: “The housing market doesn’t seem to be following tradition of late – whereby all goes quite at the start of December until the New Year.

“We are experiencing high levels of interest and sustained reservations as serious buyers who recognise just what amazing incentives are on offer to help them move efficiently and cost-effectively.”

For details of new homes around the region, visit www.stamford-homes.co.uk

Pic cap
There is still time to put a Stamford home on your Christmas wish list.

- ENDS -

Notes to the Editor:
Stamford Homes operates throughout the East Midlands and Lincolnshire and forms a part of Galliford Try’s Housebuilding Division: Galliford Try Homes.
www.stamford-homes.co.uk

Galliford Try Homes operates through four strong regional brands: Linden Homes, Stamford Homes, Midas Homes, and Gerald Wood Homes specialising in brownfield development. The business is capable of developing over 3,000 homes per year, covering the entire region from the West Country to Lincolnshire and the South-East.
www.gallifordtryhomes.co.uk

For further information please contact:

Cetti Long
Media Matters PR
Stamford Homes
Tel: 01733 371363.
E-mail: cetti@mediamatters-pr.co.uk

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Speech by Lesley Titcomb, Director of Small Firms and Contact Centre, FSA
Keynote address to the European Mortgage Federation’s annual conference
19 November 2009

Around the world the financial crisis has required interventions of unprecedented scale. The support of governments and central banks has been crucial and will remain a significant factor for the foreseeable future. The causes of the financial crisis can be traced back to fundamental issues with the development of the global financial system and macroeconomic imbalances.

But mortgage lending, and in particular the past quality of it, has found itself under the spotlight. The loss of market confidence in 2007 was a result of growing problems with US mortgage-backed securities. What the risis has not revealed is evidence of misselling and irresponsible lending in European mortgage markets on anything like the scale seen in the US. This only highlights that mortgage markets, at the retail level at least, remain largely national. The differences between these national markets are many.

While the retail market may remain decidedly national, funding is clearly global and so the effects of the crisis have been widely felt. Mortgage lenders across many countries had come to rely more on wholesale funding sources, which dried up overnight. With the securitisation and covered bond markets closed, and other forms of funding scarce, gross lending has fallen across Europe.

Given how closely mortgage and housing markets are intertwined, it is not surprising to see a similar story here, albeit with a few exceptions. But also interesting are the differences in some of the figures. While the decline in lending has been sizeable in countries like the UK and Ireland, in others it has been much less so. The same is true for house prices. Again this only goes to illustrate how national markets differ, which in turn means that EU Member States responding to the crisis will have different issues to address.

Addressing the problems

What is noticeable, however, is the degree of common cause on addressing the fundamental problems. The funding issues have been truly global and the challenge is being addressed at the international level. There is much to be done, for example, through the Basel Committee work on significantly strengthening the global capital regime. We are active contributors to this work, as well as taking a series of steps nationally to reform our prudential policy framework.

The EU has also grasped the nettle, recognising the need to improve on existing safeguards and introduce new controls. A key element will be clearly implementing in the EU the new standards agreed by the Basel Committee. The regulation of credit rating agencies aims to increase confidence and deliver ratings qualitatively better than under current standards. Of course, this is no substitute for firms doing their own due diligence on potential purchases, and so we support the principle of new requirements on investor due diligence and originator transparency.

Then there are the European proposals to constrain risk transfer arising from past developments in the securitisation markets. Changing it so that banks and other regulated financial institutions can only buy into securitisations where the originator retains a significant piece of the net economic interest should help correct a past failing.

It is not surprising that these policy developments are focused on wholesale and prudential matters; this is where the market is most international in character. The differences I previously mentioned in retail markets mean that the majority of consumer-facing actions are being taken at the national level. So, for example, the Dutch authorities are looking at strengthening affordability measures. Meanwhile several countries have been grappling with how best to address the potential for consumer detriment as a result of their markets featuring large volumes of foreign currency denominated lending.

For a number of others, thinking has been prompted by the need to implement the Consumer Credit Directive (or CCD). This, of course, only applies to unsecured credit and the risks and features of mortgages are very different. But understandably, countries that have not previously had specific mortgage rules will look at the CCD to see if there aren’t at least a few aspects that make some sense when applied to their mortgage market.

The UK, on the other hand, is one of those countries that already has in place specific mortgage regulation. This is far more extensive than the CCD, so the Directive hasn’t been the prompt for us to look again at our regulatory approach.

But we have, as many of you will know, been undertaking a fundamental review of the UK mortgage market, the causal drivers for poor outcomes and the most appropriate regulatory response to these. The result is our recently published Mortgage Market Review Discussion Paper. This marks a very significant shift in our strategic direction. The review is not a response to current market conditions. Rather, it looks across the economic cycle, the good times and the bad, with two broad aims in mind. The first of these is a mortgage market that is sustainable for all participants – consumers, lenders, intermediaries and investors. Secondly, we want to see a flexible mortgage market that works better for consumers.

Many consumers have benefited from a UK market that in large part has been competitive and has evolved to meet a range of borrowing needs. The vast majority of these consumers are continuing to meet their mortgage payments and see no increasing risk of losing their home. But the market has gone wrong for some and where it has it is a cause of major economic distress. Such cases highlight that UK regulation has been ineffective in constraining particularly risky lending, or unaffordable borrowing. We need to put this right and the Mortgage Market Review  says how we plan to go about this.

As you would expect, our review focuses on the UK market and the issues we see there. Just as we wouldn’t claim to be experts on other national mortgage markets, the review should not be seen as a response to matters that have arisen in other countries. So if you were to ask me what elements of our Mortgage Market Review might best translate to other markets, my answer wouldn’t be to highlight any particular policy conclusion of ours. Rather, I would stress the value of carrying out an evidence-based analytical review of the causes of detriment. As well as providing a clear base for national policy development, such reviews can help refresh the knowledge of a wide set of stakeholders. After all, market conditions have changed greatly since several of the Commission’s studies in support of their White Paper agenda.

While our focus has been the UK market, in thinking about how we might best achieve our objectives we have consciously sought out policy approaches from around the world. The issues may be different in each market, but the options available to regulators are not infinite, so it makes great sense for us to look at others’ experience in using various policy tools. We’ve learned a great deal from doing this, and in turn we hope our analysis will be of interest beyond the UK.

Take, for example, the question of banning sales of products above a set loan-to-value (LTV) or loan-to-income (LTI) ratio. Earlier in the year The Turner Review said we would specifically consider the case for using such tools in the mortgage market. We’ve looked at a number of countries who either ban high LTV mortgages or who make use of income affordability measures such as an LTI multiple or a maximum debt servicing ratio. Typically LTV ratios are used to limit credit growth, stabilise a volatile property market or enhance financial stability, while income multiples tend to be used to prevent borrowers defaulting.

The use of such measures makes instinctive sense. But having now analysed the performance of tens of thousands of UK mortgages, we don’t have overwhelming evidence for banning high LTV or LTI lending. While the UK saw a very rapid growth in mortgage credit, the fundamental driver for this was not a growth in high LTV lending. In fact, the average LTV for house purchase has been falling since 1997. Similarly, while the data suggests that higher LTVs can lead to higher default rates, the same analysis finds that other mortgage characteristics are stronger indicators of payment problems ahead. In particular, much more powerful predictors of default are if the borrower self-certifies their income or is credit impaired.

There is a much clearer link between high LTI lending and the UK’s rapid growth in mortgage credit. From the early 80s to the peak of the market in 2007, LTIs rose from less than twice the average income to more than three times. A high LTI might be thought to describe the kind of financial stretch that would increase the borrower’s chance of defaulting. But our analysis shows the LTI not to be a strong predictor of arrears, less reliable in fact than the LTV.

None of this means that we don’t think high LTV or LTI lending has contributed to issues in the UK market. What we are saying though is that from the available evidence neither form of lending has been a causal driver for the problems we’ve seen. Given this, our current view is that it would be overly blunt to simply cap lending at high LTV or LTI ratios. There are many consumers with such loans for whom affordability has never been an issue.

We think though that there may well be scope for a more targeted approach, curtailing lending where there are multiple risk factors. We are looking to see if there are toxic combinations of borrowing that put a consumer at greater risk. This means poring over the characteristics of loans that go into default to find out if, for example, there is a clear trend where a consumer with past credit impairment and an unstable income borrows at a high LTV. If we find that there are toxic combinations, we feel that prohibiting these would address the detriment from imprudent borrowing or lending much more directly, and proportionately, then simply preventing any lending above a set threshold. That said, there might be a case for such a threshold in support of a wider macro-prudential objective, and we would want to revisit this if future arrears data suggests a stronger link with the affordability of the loan.

A rigorous assessment of affordability is central to what our Mortgage Market Review is looking to achieve. Like many other regulators, we had previously assumed that prudential self-interest would focus a lender’s mind on the question of affordability. We went beyond this when regulating, to explicitly require a firm to assess affordability from the consumer’s perspective, but we kept the requirement at a high-level because of the assumption that lenders already had their own reasons for wanting to lend only to those who could repay.

We now think that assumption is flawed. Developments in financial instruments have allowed some firms to sell off any risk resulting from originating poor quality business. More fundamentally, from a UK perspective at least, in a housing market showing strong and consistent year-on-year growth, lenders have less regard to individual affordability. Put plainly, increases in the asset value minimise the chance of any loss given default. So, we plan changes that will make it much more explicit that lenders bear ultimate responsibility for assessing affordability.

Placing the onus on lenders is an important principle for us. Unlike the great majority of Member States we have a mortgage market where intermediaries play a leading role. For many years intermediaries have been responsible for the majority of mortgages sold. This means, of course, that intermediaries must offer a professional service, but the bottom line is that they are not product designers and they do not make the decision to lend. So it makes sense, we think, to focus particular regulatory scrutiny on those that do – lenders.

One way of doing this, which the Mortgage Market Review flags, is through product regulation. We see this embracing a wide range of policy options. For example, it could mean prohibiting a particular product type or facility. The most obvious example for us is self-certification of income, which I appreciate has not been a common product feature in other markets. We’re proposing that in future lenders should verify all income. Another example, and a different form of product regulation, would be the work I mentioned earlier on toxic loan combinations.

In each case, product regulation allows us to address a specific risk. We don’t though see a role for ourselves as the designers of ‘plain vanilla’ mortgages. Even were you to create standardised mortgage products that were simple to understand, it’s difficult to see how they could ensure that the disparate borrowing needs of consumers are well met. To our way of thinking, interventions that significantly constrain sensible and sustainable product flexibility and diversity would be a poor outcome for the future.

The current poor outcomes for some UK mortgage borrowers have been a key driver for our review. The most extreme example of this is the loss of the home. Our concerns about the fair treatment of UK borrowers in payment difficulties have been well-publicised, and this continues to be an area to which we attach particular importance. Repossession must be the last resort for any lender and they should look at the full range of forbearance options they can use. Nor should lenders look at borrowers in arrears as an additional income stream. But we recognise that repossession has to remain a possibility, for example, where realistically the borrower is never going to be able to repay. In such circumstances the consumer’s own interest might not be best served by remaining in an unaffordable property while missed payments and arrears charges eat into any remaining equity.

Consumer protection and Commission intervention

The financial crisis is causing all policymakers to reassess their approach and reflect on the adequacy of consumer protection measures. We are no different in this regard, nor is the Commission. In the past, the Commission’s focus has been to remove obstacles to the internal market and improve the efficiency and the competitiveness of EU residential mortgage markets. Commissioner McCreevy continues to position the development of a more integrated market as the overriding driver for any action at EU level, but the desire to restore consumer confidence is inevitably leading to greater scrutiny of consumer protection measures.

The Commission set out its vision in its spring communication. In speaking of ‘delivering responsible and reliable markets for the future and restoring consumer confidence’ the Commission said it would come forward with measures at EU level on responsible lending and borrowing. Included within this was a call for a reliable framework on credit intermediation.

Concrete measures have been delayed until the new Commissioner is appointed, but policy development continues. The White Paper on mortgage credit kick-started a major work programme on measures that might support greater market integration. This includes a cost benefit analysis of possible policy options, as well as further research into areas such as credit intermediaries and non-banks. Much of this work is now completed or coming to a close. But as greater priority becomes attached to restoring consumer confidence, some re-focusing of the work programme is inevitable.

The clearest sign of this was the consultation on responsible lending and borrowing launched earlier in the year, and the public hearing that followed in September. The Commission continues to analyse the responses, which on this hot topic will surely be many in number. But what was clear from the public hearing, and it’s a view we strongly support, is that any consideration of responsible lending and borrowing needs to reflect the work already underway in response to the crisis. Changes in the wider prudential framework aim to significantly alter lending behaviours, as will actions planned or already taken by national governments or regulators. And it’s right to also recognise that the industry has taken its own steps, such as consolidating existing lending practices into the EMF Responsible Lending Standards for Home Loans.

This changing landscape presents a challenge for any policymaker. They must take account of the changing regulatory environment, understand the interaction between the various policy initiatives and identify where any intervention will genuinely add value.

As we know, the Commission has long been thinking about mortgage market interventions. This culminated previously in the 2007 White Paper, in which the Commission acknowledged that mortgage markets will remain principally national in character. The White Paper recognised that consumers predominantly shop locally for mortgage credit and that the majority will continue to do so for the foreseeable future.

The consequence for the Commission was the conclusion that any integration would be supply-driven, through establishment by lenders in the Member State of the consumer. But a lot has happened since the publication of the White Paper in 2007. The funding crisis means that firms have turned away from plans to enter new markets, and high-profile failures, such as those of Icelandic banks, are likely to further diminish consumer appetite for dealing with a firm that is not local.

Incidentally, we would agree with Commission’s conclusion on integration being supply-driven. We’ve been looking at UK consumer appetite for cross-border shopping in financial services. Our research highlights that while increasing numbers of consumers in the UK are looking outside their domestic market for low-cost, low-risk items, the appetite for shopping across borders for financial services is very limited. In fact, the evidence suggests that the vast majority of UK consumers are unlikely to take advantage of a more open market in financial services even if that market can be created.

Interestingly, the research found mortgages to be one of the products in theory most open to consumers switching to an overseas provider on the basis of a more competitive interest rate. UK mortgage borrowers have shown themselves to be very conscious of headline rates, sometimes to the exclusion of regard to wider product risks and features, so this finding is not surprising. But what was telling was that even these consumers needed there to be a significant price differential before they would consider buying cross-border. Given the global nature of the market for wholesale funding of mortgages it’s unlikely that lenders in other countries would be able to offer the price differential required to persuade consumers to switch. It’s also important to bear in mind that the research assumed that a level playing field exists in all other aspects of European mortgage markets. As we know, that is not the case.

Returning then to the possible grounds for European intervention in retail markets, current conditions are unlikely to foster greater integration. So this brings us back to possible consumer protection objectives for intervention.  Over the past year, the Commission have been carrying out consumer testing of the standardised product disclosure that is currently voluntary. The aim is to assess how to improve the usefulness and relevance of the European Standardised Information Sheet for home loans (ESIS).

In the past, disclosure has been the cornerstone of the FSA mortgage regime. But as part of the Mortgage Market Review, we have been re-examining its role. Our expectations for disclosure were that it would enable consumers to shop around and compare the services and products on offer from different firms. We also hoped it would help consumers make better informed choices. These are very similar objectives to those that the Commission has.

We now have five years’ experience with a prescriptive disclosure regime introduced at considerable cost to firms – costs inevitably reflected in product pricing. Our research shows that consumers rarely use standardised product disclosure to inform their decision-making. Consumers typically value disclosure as a record of their purchase – but a record doesn’t require standardisation of format and content. We think such evidence is an important aid to understanding the likely effectiveness and proportionality of disclosure as a regulatory tool.

There is now wide recognition of the importance of understanding consumer behaviour in developing effective policy. Not only do UK mortgage consumers not use standardised product information as intended, but the evidence collected for our Mortgage Market Review challenges our previous assumption that consumers were rational market participants. In practice, the misbuying we have seen in the UK mortgage market provides clear evidence that some consumers fail to properly engage or act in a way that would protect their own best interests.

This bears out a point made in The Turner Review regarding the limits on consumer behaviour. We think it is particularly important to recognise the behavioural limitations in the mortgage market where borrowers are too often motivated by an immediate want or need. In many cases the mortgage is simply the means by which the consumer can get the desired home, car or holiday. Consumers focus much more strongly on the end result. Understanding this limitation on rational market behaviour is leading us to take a much more interventionist approach. Through the Mortgage Market Review and our subsequent policy development, we believe we can put in place effective and proportionate measures to address issues seen in the UK market. We are committed to so doing.

Conclusion

In conclusion, we are all – the Commission, firms and regulators – aiming for the same thing. We want markets that are responsible and reliable in future, and we want to restore consumer confidence and choice.

This makes it understandable that the Commission is considering what action it might take on responsible lending and borrowing. But it is a time of great change to the regulatory landscape. It is vital that any policy thinking takes full account of the various initiatives going on internationally, at a European level and nationally. Indeed, I would go further. Given the extent of existing interventions, there are good grounds for assessing the effectiveness of these initiatives before deciding on what further action, if any, to take. This will provide the strongest evidence base for demonstrating the added value of further intervention.

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FSA/PN/157/2009
November 2009

Speaking at the Council of Mortgage Lenders’ Annual Conference, Jon Pain, the Financial Services Authority’s (FSA) managing director of Supervision, said it is important to acknowledge that although the mortgage market worked well for many, it failed for a significant minority.  Therefore, the priority must be to move towards a market that is flexible, sustainable for all and works for consumers.

Jon Pain emphasised the FSA’s new bolder approach to regulation, the importance of intensive supervision focused on outcomes, and its commitment to restore confidence in financial markets, to protect consumers and reduce financial crime.

He also sought to address some of the issues raised by the industry following the publication of the mortgage market review last month.  Outlining the rationale for the review, the key points emphasised were:

• The FSA is not seeking to block access to the market through income verification measures; rather, it expects these to yield various benefits, including a reduction in the number of unaffordable and unsuitable mortgage transactions; a decrease in arrears and repossession rates; improved transparency; a reduction in mortgage fraud; and an improved confidence in, and therefore sustainability of, the market more generally;
• The FSA will work closely with firms to identify acceptable verification measures and best practice for affordability assessments;
• Affordability checks will not look to judge how individuals spend their money but it is essential for lenders to do an appropriate and proper assessment of a borrower’s genuine ability to repay;
• It is not the FSA’s intention to penalise ‘non-banks’ or to stifle competition but is looking to curb the particularly high-risk lending strategies that led to significantly higher mortgage arrears levels; and
• The issue of arrears need urgent attention and to this end, the FSA will consult in January 2010 on tightening its conduct of business rules on arrears handling.

Jon Pain concluded:

“Just as a house requires solid foundations to be long lasting, mortgages need to be based on a proper assessment of affordability if we are to have a sustainable market.  Everyone who takes out a mortgage should be able to repay it – they should have some evidence that they can repay it and lenders should take note of that evidence.  We want lenders to get back to the basics of responsible lending and we will continue to push the industry where we find firms are not treating their customers fairly.”

Notes for editors

1. The full speech is available to view on the FSA website.

1. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.

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The competitive house prices and rents seen over the past two years have opened up the prime property market to a wider variety of homebuyers and tenants, says email4property.co.uk, with many more now looking to make their move as the market shows signs of recovery.

While seasoned investors were quick off the mark to snap up prime property at bargain prices as the market showed the first signs of bottoming out earlier in the year, less experienced cash-rich buyers are now looking to act quickly amid signs of sustained price growth. Tenants have also benefitted from price falls in the rental market. Many are now hoping to trade up to better homes in more desirable locations and tie into a year-long contract before prices rise out of their reach.

Email4property.co.uk, the UK’s largest online network of estate agents, has seen a 20% increase in the use of its ‘Premier Property’ search option since August this year. It has some essential tips for those looking to capitalise on current market conditions and enter the prime market:

How much is a prime postcode worth to you?

Even if you can afford to buy or rent in a more upmarket location, it might not always be worth your while doing so. If you are stretching yourself financially to secure a particular street or district, you may not achieve the prestigious lifestyle you had hoped for. Consider how important the locality is to your living needs and whether you might be better off seeking more for your money elsewhere. A studio flat in Chelsea is still a studio flat, regardless of its postcode!

Premier property needs a premier agent

Different agents cover different sectors of the market. Those that focus on prime markets and list higher-end property will also be best placed to advise you. Not only will they have access to the best range of homes in your area, but they will also have the experience and expertise to be candid with you on your expectations and restrictions. Visit the ‘Premier Property’ function for your chosen location on email4property.co.uk. For example: www.email4property.co.uk/chelsea/premier-property

Make sure you are precise and accessible

Be upfront with your agent on exactly what it is you are looking for and how much you are willing to pay. Having opted to go for a prime property you may be unwilling to compromise, particularly if you are buying, but the agent will be able to advise on whether your criteria is realistic. Be as forthright as possible with them about the property you want to view, so that no time is wasted in your search. Rest assured you will not be the only person in your area on the look-out for a prime bargain, so ensure you are also readily available to receive updates from your agent.

Don’t neglect the home-searching basics

While the location and/or style of the property may be sufficient enough for you to make a decision, you should not neglect the standard home searching procedures. Judge the property on all the merits you would in normal circumstances – such as the local amenities, transport links, schools etc. Depending on how long-term the move is, consider how the home will suit your changing needs over time. And of course, do not neglect any assessment of the general state of repair! A bargain priced conversion property in a dream
location is likely to need as much work as any other – it could soon lose its bargain status if significant work needs to be done to make it liveable for the long-term.

Steven Lees, Head of Marketing for email4property.co.uk, comments:

“Those lucky enough to have had sufficient capital to secure a mortgage over the past two years have been in a strong position to capitalise on the low prices available across the market, and many have been able to secure homes that would previously been out of their reach.

“With strong signs of firming house prices and rents starting to improve across the sector, people are now realising that the prime market may not remain open to them for much longer. However, there are still options available and plenty of specialist agents across the
country who are well-equipped to advise buyers/renters on their options and help them source the best properties available.”

For a comprehensive list of estate agents in your area visit: www.email4property.co.uk

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