Introduction

• Good afternoon ladies and gentlemen and thank you for that introduction Stephen.

• I?d like to start by paying tribute to Paul Smee who so capably led the CML and managed the transition to UK Finance.

• When I came to my first CML annual lunch 16 years ago I don't think I ever imagined that one day I would be standing here in front of you as Director of Mortgages. 

• The mortgage market is ever-changing and now is as interesting a time as it's ever been and I?m delighted to be back championing the industry.

• My role, and that of UK Finance, is to represent the industry to our external stakeholders and partners and ensure that the mortgage market remains vibrant and successful.

• The UK Finance Mortgages Product and Service Board leads the direction of the mortgages work within UK Finance, supporting the mortgage team and helping to identify potential threats and opportunities for the industry. 

• The Chair of the Mortgage Board for this year is Miguel Sard from Santander, who unfortunately can't be with us today, and our Deputy Chairs are Lloyd Cochrane from RBS and Richard Rowntree from Bank of Ireland.

• So what are the prospects for the mortgage market this year?  We expect gross lending to be around £260 bn in 2018, the highest figure for a decade.  And we expect that to grow modestly in 2019 too, to around £271bn.  This is not back to the level of the heady days of the mid-2000s -  which is probably a good thing.  We have a strong market which meets the needs of consumers and is probably one of the most innovative in Europe, if not the world.

• Remortgaging figures are strong too, with the £76 bn of business last year the strongest since 2008. 

• It's worth noting that around 94% of those remortgaging are taking out a fixed rate mortgage, suggesting that customers are locking themselves into a fixed rate as it looks increasingly likely that a Bank of England base rate rise is around the corner.  And more people are taking longer terms fixes too with more 5 and 10 year fixes available in the market at competitive rates. So far this year nearly half of new fixed rate business has been at 5 years or more, compared to around a third over the last few years.  

• Arrears were at a historic low in 2017 with 89,000 people with arrears balances of 2.5% or more of their outstanding mortgage.

Threats

SMI

• However, we are expecting those numbers to increase this year as some households come under pressure from base rate rises and others will be affected by the changes in Support for Mortgage Interest.

• For those who are not aware, the long-standing support that people can get from the government if they are out of work or receiving pension credit, changed from a benefit to a loan earlier this month.  Claimants have to sign up for the loan and, so far, out of the 90,000 eligible, the vast majority have not.

• UK Finance has been coordinating efforts with lenders, debt advice charities and others to try to ensure recipients are made aware of the changes and take action.  We have also been liaising closely with the government.

• Lenders have been contacting customers and discussing options with them for making up the payments if they do not want to take out the loan.  However, that's not an option for everyone and unfortunately some may fall into arrears.

• Repossession is always a last resort and we will continue to monitor the situation closely over the remainder of the year.

FCA Mortgage Market Study:

• Another uncertainty is what the outcome of the FCA's Mortgage Market Study will be. We are expecting the interim report later this quarter as signalled in the FCA's Business plan earlier this month.

• The industry has been enjoying a period of relative regulatory stability following the MMR and the Mortgage Credit Directive, so we hope the outcome does not disrupt that, or negatively impact on the relationships between lenders and brokers.

• Whatever the outcome, we will continue to work constructively with the FCA for the benefit of industry and consumers alike.

Opportunities

Later life lending

• We welcomed the FCA's recent publication of final rules on retirement interest-only mortgages.

• This is an important development that will offer homeowners in later life an alternative option, particularly for those who are asset rich but cash poor and want to leverage their assets.

• This an underserved but growing market segment. We have an ageing population with more complex lending needs and a generation of people who are more used to managing their finances more flexibly. 

• We have already seen a number of market developments and innovations in this space and it will be interesting to see how the market responds to these new rules.

Modern Methods of Construction/Custom build

• Another area where we are seeing innovation is in housebuilding, with an increased use of Modern Methods of Construction and Custom build.

• These will be vital in delivering the extra homes we need to meet decades of under supply and we are working through the government's MMC working group to ensure that new ways of building properties are suitable to be lent on.

Conclusion

• As you?ll have heard from both Stephen and I the mortgage market faces a number of challenges in the year ahead, but there are also opportunities to expand into underserved segments of the market. I am confident that the mortgage industry will continue to thrive.

• UK Finance is here to help all its members make the most of the opportunities and minimise the impact of threats, whether they are banks, building societies, specialist or non-deposit taking lenders or third party administrators.

• I hope you enjoy your lunch and I?m delighted to hand over to Joseph Howe from DePaul's, our charity for today's event.