Speech by Stephen Jones, Chief Executive of UK Finance, at the UK Finance Annual Mortgage Lunch:

Hello all and welcome to the inaugural UK Finance Annual Mortgage Lunch. It's fantastic to see so many of you here. As you all know, UK Finance was born out of the integration of six trade associations including the Council of Mortgages Lenders (CML).

We?re delighted to be able to build on the success of CML, who made this event such an important fixture in the industry's calendar in previous years. And we?re also proud to be able to continue to the crucial work of the CML in ensuring the voice of mortgage lenders is heard, influencing key stakeholders and helping you to deliver for your customers. And we are delighted that the sun has come out.

As all of you in this room will know, the UK mortgage market is highly competitive. There were 1.22 million mortgage property transactions last year, equivalent to almost 5,000 per business day. It is also an incredibly diverse sector, something I am very aware as UK Finance has over 150 mortgage members, a figure I hope will continue to grow.

And it is a sector that plays a vital role in our economy and society as a whole. Lenders help people fulfil their aspirations and realise the dream of home ownership. You give families the long-term security they need to plan ahead for the future and settle into their local communities.

Last year lenders helped 365,000 first-time buyers get a foot on the housing ladder, the highest number in a decade. And in total there are now an estimated 8.6 million owner-occupied homes in the UK with a mortgage. That is millions of customers across the country enjoying the stability that comes with owning your own home.

But the industry doesn't just serve private home owners. There is a crucial drive across the sector to support affordable housing across the UK. Lenders provided 8.6 billion pounds of private finance for social housing in 2017. This vital investment helps to fund affordable homes across the country and put a roof over people's heads, including some of the most vulnerable in our society.

Lenders also have a responsibility to ensure that they only offer loans to borrowers who can afford it, and that those customers who do enter financial difficulty are given the support they need. So it is welcome news that across the country, overall arrears and possessions have reached historic lows. Last year there were fewer than 5,000 homeowner possessions, the lowest level since 1980.

This has been helped by low interest rates and a significant degree of forbearance by lenders. The Bank of England's Financial Policy Committee recently raised concerns about credit conditions in the mortgage market, and particularly about high loan to income ratio loans. But it is important to point out that a higher Loan to Income (LTI) ratio does not necessarily equate to riskier lending.

In fact the evidence shows that the regions where high Loan to Income lending is most widespread actually have the lowest incidence of mortgage arrears. And, of course, all lending is underpinned by the Financial Conduct Authority's responsible lending rules.

Admittedly, the picture is not all rosy. In particular, we have seen a recent fall in buy-to-let investment, driven by recent tax and legislative changes. Our analysis shows the number of buy-to-let mortgages fell to 74,900 in 2017, down 27 per cent on the previous year. This impact isn't being felt equally across the country. Investment has been more resilient in areas with higher yields, particularly in Northern England and Wales.

However in the high-value, low yield regions, particularly in London and the South of England, investment is falling. This risks putting upward pressure on rents in areas and supply of privately rented homes in areas where many people still can't afford to buy their own home.

UK Finance is carefully monitoring the impact of recent legislative changes on the buy-to-let market. And we are liaising closely with the Government, the Opposition, and other key stakeholders on the other major challenges and opportunities facing the industry.

There are a number of areas that pose risks to the sector, but of course one major cause of uncertainty is the UK's withdrawal from the EU. Indeed it's almost impossible to give a speech these days without mentioning the B-word.

Brexit could have a significant impact on the mortgage industry, as any impact on business confidence and the economy will also be felt in the housing market.  It could also impact on access to capital markets, an issue I know some of our members have raised.

So UK Finance is working closely with the government and the EU to look at how to minimise disruption to firms and their customers. I gave evidence yesterday to the House of Commons Brexit Committee as part of an energetic programme of policy and advocacy work representing the interests of all types of UK Finance members including mortgage lenders.

We have proposed a credible model to ensure that the flow of financial services between the EU and UK can continue, including access to capital markets. And we continue to push for a transition deal that is certain so we have sufficient time to adapt to our relationship with the EU.

In this context, I also want to draw your attention to the speech by Alex Brazier, Executive Director for Financial Stability and Risk at the Bank of England, yesterday. In it, he highlights the three risks faced by the financial system and specifically references the mortgages market. We should all take note.

Firstly he highlights the risk from Brexit which I have just discussed. As he says 'the challenge is to keep finance capable of serving the economy through Brexit, whatever form Brexit takes.? Whilst he judges UK banks able to withstand any economic shocks arising from Brexit, he does highlight the risk to end users on both sides of the Channel of barriers to deliver wholesale services. UK Finance is very focused on this risk, and is working hard to mitigate it for our members, including UK mortgage lenders and their customers.

Secondly, he highlights increasing risk-taking by the system. I will read his comments which are focused on the mortgage market. [Stephen here references the speech by Alex Brazier Bank of England, Executive Director for Financial Stability Strategy and Risk, pages 6 and 8]. We should take note and be prepared

Thirdly he highlights the fundamental reshaping of the system, banking becoming more competitive and small institutions whose back book accounts for less than 20 per cent of household lending stock, delivering around half of all new lending in the recent past. In this context the Bank notes its focus on the resilience of smaller players to shocks.

And he then discusses the risks of unbundling of banking services presented by Open Banking, and in particular the stickiness of bank deposits, which the Bank will monitor for stability and for which it may require greater liquidity reserves. A lot to take in and plan for.

Fraud is of course another area of major concern to lenders, with losses to the mortgage lending industry estimated at around £1.3 billion a year. Through initiatives like the Take Five to Spot Fraud campaign, UK Finance is working to raise awareness of fraud and help consumers and businesses identify common scams.

Over a quarter of a million people (284,000) have taken our Take Five ?Too Smart To Be Scammed? quiz, which teaches people to distinguish between genuine messages and fraudulent ones. If you haven't already, I?d encourage you to check it out on our Take Five Website. This campaign shows how by working together across the financial services industry, we can minimise losses and reduce the impact of fraud on lenders and their customers.

But it's not all about challenges. Technological advances and the changes brought about by Open Banking are also creating significant opportunities for lenders. Last month the land registry registered its first ever ?digital mortgage deed,? allowing borrowers to sign their mortgage deed securely online at a time that suits them.

You can even now ask Alexa to search for a mortgage online and it will put you in touch with nearby brokers. More useful than having Alexa wake you up in the night laughing as some have recently reported. And just last week, the first ever house was built in France using a 3D printer.

This is only the beginning. The race is now on to develop new products that will make it easier for customers to shop around for mortgages and find the right deal for them.

UK Finance is to here help our members adapt to these changes, so you can make the most of the opportunities they present while minimising the risks. Using the collective weight of the financial services industry, we can ensure the voice of lenders is heard loud and clear in Whitehall and Westminster.

And our policy teams can provide expertise on everything from Brexit to Open Banking, helping you to deliver the best outcome for your customers. It now gives me great pleasure to introduce Jackie Bennett, Director of Mortgages at UK Finance.
Jackie recently took over from Paul Smee, who played a key role steering the Council of Mortgage Lenders into UK Finance. She joins us, as you know, with an incredible reputation in the industry.

She previously worked at the CML for 13 years, 10 of them as Head of Policy, and has an OBE for her contribution to finance. So without further ado, I?d like to hand you over to our new Director of Mortgages at UK Finance, Jackie Bennett.