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Speaking at UK Finance’s Annual Mortgage Dinner on Monday 3 December 2018, Jackie Bennett, Director of Mortgages at UK Finance, said:
“Welcome to the second UK Finance Annual Mortgage Dinner. I’m proud to represent an industry that helps millions of people have a roof over their head whether that’s through home ownership, buy-to-let or social housing. Despite some uncertainty in the broader economy it’s been a good year in mortgages. Gross lending is likely to hit around £270 billion this year and product transfers are likely to be an additional £150 billion.
We all await the final report of the FCA’s Mortgage Market Study in Q1 2019 to see what it says about the future direction of the mortgage market. Let’s not forget that the interim report actually said that the market was working well for the majority of customers. One of the things I hope the final report doesn’t say is what the direction of travel on fintech should be. There are some interesting and exciting developments in this area with more to come in the next few months and it would be a shame if the regulator inadvertently cut across allowing this market to develop in its own way to meet market needs.
In response to the challenge laid down by the FCA, I was delighted that we were able to deliver a voluntary industry agreement at the end of July with the BSA and IMLA, to help existing borrowers on reversion rates. Thousands of customers will have been contacted by their lenders by the end of the year.
However, there are thousands more customers with inactive lenders or unregulated owners that we are currently unable to help, even if they can demonstrate they are successfully making higher payments. Many of those customers cannot meet the new affordability requirements and lenders cannot use the previous transitional arrangements because of the way the Mortgage Credit Directive was brought in, in the UK.
We continue to explore with the FCA what might be possible for these customers. But this is likely to require Handbook changes at the very least, and possibly legislative changes. We know the FCA and Treasury are actively considering this important issue.
To reflect on a few other successes we’ve had this year:
- We’ve published a new member-only interest-only toolkit to share best practice among lenders. This follows publication of our interest-only data which showed that the back book has halved in six years.
- We’ve worked with the DWP, lenders and voluntary sector and so far minimised the impact on customers of the change of Support for Mortgage Interest from a benefit to a loan.
- Help to Buy has been extended to 2023, a decision we actively supported.
- We launched a new Disclosure Form for sellers of new build homes.
So, what can we expect to see in 2019?
We’ll see the CMA’s response to the Citizen’s Advice Super Complaint and we’ll have to respond to the FCA’s Fair Pricing Discussion paper.
We’ll see the FCA’s paper on vulnerability, setting out their proposals for how we should support customers at difficult times in their lives.
We expect that the buy-to-let market will continue to see the impact of tax, legislative and other changes, particularly as landlords have to start paying their increased tax bills.
We expect the government to start firming up its proposals on leasehold to ensure that customers get a fair deal if they are in a leasehold property.
And on a broader front we’ll continue working with members to understand the impact of the transition from LIBOR to SONIA, due to happen by the end of 2021. We are working across our broad membership base and across UK Finance to understand the impacts from a funding, securitisation, derivatives, lending, operational and importantly, a mortgage contract perspective. We know that some customers are on LIBOR-linked mortgages and it is vital that there is a smooth transition for them.
I’ve managed to get this far without mentioning the B word – Brexit. UK Finance and the industry have worked closely with the FCA and government to mitigate the cliff edge risks associated with a ‘no-deal’ Brexit.
However, a no-deal outcome would still cause significant disruption for firms and their customers on both sides of the Channel, which is why we strongly support a managed exit together with an appropriate implementation period. Parliament now has a responsibility to prevent a deeply damaging no-deal Brexit.”
Notes to Editor
- UK Finance is a trade association formed on 1 July 2017 to represent the finance and banking industry operating in the UK. It represents more than 250 firms in the UK providing credit, banking, markets and payment-related services. The new organisation brings together most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association.