Ray, you’ve been with Charcols for almost 30 years now, over that time how would you view the mortgage industry’s record on innovation?
Since I joined John Charcol the mortgage industry’s record on innovation has been more focussed on niche markets, some of which can no longer really be classed as niche, such as BTL. Since 2007 innovation has been stifled, first by the credit crunch and then by regulatory over reaction.
Following the Global Financial Crisis, we’ve seen a very different view on credit risk. Clearly some aspects of the industry needed tightening but do you think it’s gone too far in some situations: contractors and self-employed borrowers for example?
Yes in some situations, but most contractors shouldn’t have a problem getting a suitable mortgage now, as long as they consult a good independent broker.
It is ridiculous that the FCA insists on the same type of affordability assessment for, e.g. a 25% LTV mortgage as for one at 95%. Likewise, the regulatory requirements on interest only mortgages are overdue for reassessing.
When we leave the EU some rules we were forced to adopt following the MCD should be revoked, e.g. the artificial distinction introduced in the BTL market between investment and consumer BTL.
You’ve recently spoken of your distrust for some of the house price indices: where do you see the market currently?
The problem with some indices is that they are manipulated, or to use the technical term “seasonally adjusted.” In most cases journalists ignore this, which means they misinform readers of the real situation. Other factors influence prices more than the seasons and in any case seasonal factors have reduced over the years, probably partially because of the internet. Just because there are more transactions at certain times of the year doesn’t mean that prices are pushed up.
Fortunately the Government has now recognised the problem and the figures published by the new UK HPI are not seasonally adjusted.
The Mortgage Lender is one of the new challenger brands in the market, what opportunities do you see for them?
It is particularly good to see more competition in badly served parts of the market and the adverse credit sector is where TML is likely to see most business, although its contractor criteria is also very competitive for those who have not been contracting long. It is also good to have another lender who will consider quirky cases.
Being prepared to consider bankrupt / IVA cases only 3 years after discharge, subject to a subsequent clean credit profile, is helpful and in particular it is good to see TML including 5 year fixed rates at very respectable rates as an option for such clients to help longer term budgeting.
There’s a great deal of experience and a few familiar faces across the team at TML, how important do you think these are to launching a successful new lender?
For a new lender this is really important and will have been relevant in gaining FCA authorisation. Brokers will definitely have more confidence dealing with a new lender headed by familiar old hands.
We’ve just had the Chancellor’s Autumn Statement; much of the media has focussed on the impact on earnings, which isn’t necessarily great for borrowing, what was your take on it?
Rather a damp squib, apart from a few decent jokes, but disappointing that The Chancellor didn’t take the opportunity to address some of the unfair consequences of the 3% stamp duty surcharge. However, his problem is that forecasting (guessing) the path of the economy over the next few years is even more difficult than usual. The Housing White Paper due in January is likely to be more relevant to our market.
As one of the industry’s most experienced and respected figures, what words of advice would you offer the team at TML?
I would hesitate to offer advice to a team with so much experience, especially in the sectors of the market they are specialising in, except to say that the senior management should continue to maintain regular contact with their broker partners and if brokers ask for something that they can’t deliver explain why. Finally, please don’t preface any announcements of criteria tightening with the words “As a responsible lender.”
Was there anything special you wanted for Christmas?
At 71 I am too old to be thinking of personal gifts. The best present for me would be that the new 23-bed residential neurological and complex trauma rehabilitation facility my daughters and I are building, in Sheffield, is completed as scheduled on 9 February, so that we can start treating patients in February. www.stepsrehabilitation.co.uk