Jon Burridge Blog

Monday 4th October 2010




It is just as well that none of our industry commentators are weather forecasters.

If they were, I’d often find me and my panama hat soaked through, having been told it was going to be a scorcher, or I’d be sweating in my raincoat on an Indian summer’s day.

And anyway, who would I trust?

For example, Hometrack said in its latest report that house prices have fallen in every region.

Yet, using an online ‘house price centre’ powered by Zoopla, I find national house price increases. So, do I dust off my panama or don my raincoat?

However, there does at least seem to be some unanimity among lenders when it comes to house prices.

At a recent mortgage convention in Newport (gone are the days of Dubai or Cannes) I had the fortune to listen to both the chief economist of Santander and the director of mortgages for the Lloyds Bank Group.

Both industry heavyweights were preparing for further house price drops of around 10–15% during 2011 (although both said this would not be reflected in London).

What struck me more than anything was how relaxed they appeared to be about their forecasts, and this got me wondering why – even more so, when you realise that the director of mortgages for Lloyds was giving his last address in that capacity and then hot-footing it to London to say his corporate goodbyes before jumping the fence into a role at Countrywide.

There are many negatives on the horizon for the housing market, beyond just house prices.

The conclusion of the Mortgage Market Review is fast approaching. This will most likely see the end of self-certification and interest-only mortgages, require individual authorisation of sellers (which one bank estimated would cost £15m per year for one call centre of 400 staff, a cost that will be passed on to borrowers in pricing) and regulation of how a lender can calculate what an applicant can borrow.

So, we are likely to see fewer advisers (unoffical numbers suggest that there are now only around 9,000, down from some 37,000 in 2007), higher priced products and fewer of the population able to take out a mortgage because of more stringent lending policy across the industry.

Oh, and of course, the FSA has such a firm grip on the neck of the industry that new lenders looking to enter the market are being squeezed blue. I was told the other day that the FSA now refers to what we all know as ‘centralised lenders’ (ie lenders that do not have a branch network and generally don’t offer retail banking) as ‘non-banks’.

If there were such as thing as an industry insult, that has to be pretty close. I struggle for a comparison, but how about a certified book-keeper being called a ‘nearly-an-accountant’ or a GP a ‘not-quite-a-surgeon’? But I digress.

So with all these black clouds, where is the sunshine?

Well, both Lloyds and Santander were also in agreement that next year we should see similar levels of lending to this year, a statistic that viewed on its own does not particularly inspire confidence.

It had been a long day, so some of my recollections might be a bit off, but I recall someone saying that the average age of the first-time buyer is likely to be 39 in five years’ time.

So, with movers seeing their properties losing value, fewer first-time buyers coming into the market, and remortgages not likely until significant rises in rates, where is the business going to come from?

Re-enter buy-to-let.

Fewer people having access to credit to buy a property, first-time buyers waiting longer, increasing numbers of single-people households: all cry out for homes to live in.

Social landlords simply cannot keep up with the pace, so it will be down to the private sector to pick up the slack. I had not understood until recently that up to around 1973, half of households rented.

So, home ownership and property being most people’s greatest asset is a relatively recent thing. Will it transpire to be a flash in the pan? Will we return to a situation where people will prefer renting to owning and doing something else with their money?

Should we care? The slack created by the lack of home-ownership demand will be met by a rise in landlord requirements, and so the net position for me as a lender is no different. My client base might change, but I am still lending and currently lending in a unregulated environment, which means a significant saving in cost as I can work in the spirit of regulation without the substantial costs associated with it.

So, I am thinking carefully about the business I am in and whether to recommend that we prepare to change our tack.

In the meantime, I think wearing both panama and wax jacket might not be as eccentric as it sounds.

* Jonathan Burridge has been in the mortgage industry for more years than he cares to remember. His background covers all aspects of mortgage lending. He has a record of success as an intermediary, winning many awards and most importantly keeping clients and providers happy.