Transcript Document

June 2014
Andrew Freeley joins SMS as managing director
Martin Wheatley has said it was “disappointing” about how
some lenders have interpreted the Mortgage Market Review
The Help to Buy scheme has left taxpayers at risk, the Public
Accounts Committee has said
HML News
Andrew Freeley has joined
Specialist Mortgage
Services (SMS) as
managing director.
HML has appointed Andrew Freeley as
managing director of Specialist Mortgages
Services (SMS), a HML subsidiary.
Freeley has joined SMS at an exciting time for
the company. SMS provides regulated
mortgage advice in the post-Mortgage Market
Review (MMR) world, legal title management,
mortgage shortfall debt recovery and marketleading advanced analytics services.
He brings with him 15 years of experience in
the financial services sector, including head of
strategy and planning for UKAR and strategy
director for Skandia Investment Group. Freeley
started his career as a management
consultant for Ernst & Young, delivering major
strategic change programmes for financial
services clients.
“We are very excited by the growth potential of
SMS, which adds a new dynamic and suite of
capabilities to HML’s business in both the UK
and Ireland. Since the launch of the MMR, we
have experienced a high volume of calls from
customers who want mortgage advice,
demonstrating the importance of regulated
advice in the post-MMR world. SMS efficiently
delivers this for our clients and ensures
customers receive high-quality advice to help
them achieve appropriate outcomes in a fair,
transparent and well-governed manner.
“Our market-leading advanced analytics
capability supports HML’s service to clients
and also provides expertise to a range of other
clients requiring analytics to help drive
customer strategies and collections
effectiveness, an example of which is our
focus on recovering mortgage shortfall debt.
“With legal title management, SMS, coupled
with HML’s expertise in mortgage servicing,
has the capability to provide an end-to-end
mortgage management solution for clients
wishing to invest in mortgage portfolios. Over
the coming months, SMS will play an
increasingly important role in HML, delivering
diversification and growth.”
Andrew Jones, chief executive officer at HML,
commented: “I am delighted to welcome
Andrew as managing director of SMS. His
wealth of experience in the financial services
sector is a great asset and will enable us to
further develop SMS, both in the UK and
Ireland. There is certainly a lot for lenders and
mortgage portfolio investors to consider at the
moment, and HML together with SMS have the
experience and track record of delivery to
support clients and their customers through
this period and beyond.”
HML News
HML has joined the
Intermediary Mortgage
Lenders Association (IMLA).
IMLA has recently appointed Paul Darwin,
head of intermediary sales at Skipton
Intermediaries, as its director.
HML has become an Associate of IMLA due to
the growing importance of intermediaries in the
post-Mortgage Market Review (MMR) world.
John Grimbaldeston, director of
products and marketing at HML,
said: “We are delighted to become an
Associate of IMLA. In a post-MMR world,
intermediaries are building on their previous
professionalism to deliver an even more
important service to customers and lenders,
and HML wants to strengthen its relationship
with and understanding of the broker sector.
“According to the Council of Mortgage
Lenders’ Paul Smee, new lending is expected
to reach £195 billion in 2014. This reiterates
the growing importance of intermediaries, and
we look forward to developing closer
relationships both through our existing clients
and new clients.
“We expect several new lenders to enter the
market over the coming months, and HML is
well placed to work with these through our
compliant and integrated origination platform.
Outsourcing new lending allows lenders to
focus on delivering a consistent, efficient and
quality customer service by reducing
complexity and costs and increasing speed to
market. These will prove to be key
differentiators for lenders looking to attract new
customers.”
Mr Darwin said: “IMLA’s primary aim is to
develop the UK intermediary lending market
through strong and effective relationships with
brokers, lenders, the regulator and industryrelated bodies. Membership brings a wealth of
experience of this market and IMLA therefore
welcomes HML as an Associate.
“I am sure HML and Skipton will both benefit
from working collaboratively with IMLA to
ensure growth, innovation and customer
choice through an active mortgage market.”
HML News
Ben Chambers, product
development manager at
HML, provides his thoughts
on the recent Council of
Mortgage Lenders’ (CML)
interest-only conference.
At HML, we’ve tried to stay away from the term
“ticking time-bomb” when describing interestonly mortgages. We believed that while
interest-only mortgages did present challenges
to lenders and their customers, early contact
could help overcome these and prevent the
interest-only bomb from exploding.
At the CML’s recent interest-only conference, it
was clear the industry also wants to change
the perception of these types of mortgages.
The conference was titled ‘Interest only: still
interesting?’ and it is evident that it is. A new
CML survey has revealed that ALL those
borrowers with interest-only mortgages due to
mature by the end of 2020 have been
contacted by their lender about their
repayment plans, reinforcing the commitment
of the industry to support these customers.
The CML has said that a specific call to action
for the customer results in the highest
response rates. In addition, sending a letter
before making a call helps reassure the
customer that the call isn’t a scam, while
segmenting those borrowers who need to be
contacted first was also highlighted as
potential good practice.
Good practice for the fair treatment of
customers
I won’t go into detail about what constitutes
good practice – our guide succinctly
summarises what the Financial Conduct
Authority expects of lenders.
Of course, lenders should be flexible and
develop innovative products and services to
help customers with their repayment options,
although around four out of five borrowers (84
per cent) who have responded already have a
clear plan, the CML survey found.
The survey also noted that around 28 per cent
of customers who have been contacted have
responded. While this percentage is
encouraging, I do believe a lot more work
could be done to improve contact rates and
active customer engagement. At HML, our
average customer response rate is between
45 and 55 per cent - but as part of one contact
campaign we saw this figure shoot up to 61
per cent.
Why? The campaign consisted of a letter and
three call attempts, and I firmly believe that
telephone calls are an essential
communication channel if lenders are to see
success.
Continues over the page
HML News
Continued
The CML is clear on the part that customers
also play. Paul Smee, director-general,
said: "If you have an interest-only mortgage
due to end before the end of 2020 and you
have not yet responded, it is important to
communicate with your lender, even if you
know your plans are on course. If they are not,
your lender will want to work with you to help
minimise any difficulties.”
While we cannot make customers respond, we
mustn’t stop trying. The cost of running a
customer contact campaign is low compared
to the expense of holding the capital
associated with interest-only mortgages
And another key point emerging from the CML
and the wider industry is one we would
wholeheartedly support - interest only is not a
campaign to treated as ‘one and done’ - it is a
lifetime journey for the industry to address and
manage proactively and we need to focus on
all customers with an interest-only mortgage –
not just those with maturing loans on the near
horizon.
At HML, one campaign we ran for a client that
linked customers to an online repayment
calculator resulted in £10 million of balances
being converted to full or part repayment. The
benefit for both the customer and lender is
clear.
Finally, I’d like to leave you with this thought:
Are you happy that your interest-only
policy enables all accompanying
processes to be fully documented and
trained to your staff? Does it also satisfy
your requirements for the management of
end-of-term customers?
Industry Statistics
Consumer Prices Index
Unemployment Rate
The CPI decreased by 0.3% on April to 1.5%
in May. The largest contribution to the CPI’s
fall came from a decrease in transport costs,
particularly air fares. The largest offsetting
upward effects came from motor fuels, and
recreation and culture.
The unemployment rate for February to April
stood at 6.6%, representing 2.16 million people.
Compared to the previous three months, the
number of individuals in employment rose by
345,000. In addition, the number of unemployed
people declined by 161,000.
BoE Base Rate
Gross mortgage lending
The Bank of England kept the base rate at
0.5%, as well as the stock of asset purchases
at £375 billion.
Gross mortgage lending stood at £16.5 billion in
May, the same on April and 12% on the same
month in 2013, when lending reached £14.8
billion.
Halifax House Price Index
The average price of a home increased by
3.9% between April and May to reach
£184,464.
This represents an annual increase of 8.7%
from May 2013.
Stephen Noakes, mortgages director
at Halifax, said: “On an annual basis
housing demand is still strong and continues
to be supported by a strengthening economic
recovery. Consumer confidence is being
boosted by a rapidly improving labour market
and low interest rates, although growth in
average earnings still remains weak.
"However, there are signs of a revival in
housebuilding which should bring supply and
demand into better balance and curb upwards
pressure on prices over the medium and
longer term."
Home sales stood at 103,690 in April, a third
higher than the same month in 2013.
CML chief economist Bob Pannell
said: “Market indicators point to a slowdown in
activity levels, in part associated with new
mortgage rules, but it is unclear how lasting this
will be.
"Implementation of the new regulatory regime is
likely to have disrupted the normal patterns of
activity, creating statistical ‘fog’ around the
published figures. As this lifts over the coming
months, a clearer picture as to any lasting
impact of the MMR rules on lending activity
should emerge.”
Home Repossessions
Repossessions rose from 6,100 to 6,400 from
Q4 2013 to Q1 2014, the CML has revealed.
However, this represents a 20% decline on the
same quarter in 2013.
Around 1.7% of homeowners had arrears of at
least three months’ mortgage payments or
more.
Industry Statistics
Consumer Prices Index
BoE Base Rate
Unemployment Rate (ONS)
Halifax House Price Index
Gross Mortgage Lending (CML)
Home Repossessions (CML)
MAY ‘14
APRIL ‘14
MARCH ‘14
1.5%
1.8%
1.6%
JUNE ‘14
MAY ‘14
APRIL ‘14
0.5%
0.5%
0.5%
FEB-APRIL ‘14
JAN-MARCH ‘14
DEC-FEB ’13/’14
6.6%
6.8%
6.9%
MAY ’14
APRIL ‘14
MARCH ‘14
Up 3.9% on APR
Down 0.2% on MAR
Down 1.1% on FEB
Average price
Average price
Average price
£184,464
£177,648
£178,249
MAY ‘14
APRIL ‘14
MARCH ‘14
Same on APR
Up 8% on MAR
Up 4% on FEB
£16.5 billion
£16.6 billion
£15.4 billion
JAN-MARCH ‘14
OCT-DEC‘13
JULY-SEP ‘13
6,400
6,100
7,200
*Date reflects what the statistic was during that period, rather than
when the statistic was published
** January figure has since been revised upwards to £16.1 billion
Top News Stories
The International Monetary
Fund (IMF) has urged the
world to take action to
prevent another housing
crash.
“Its aims are ones we all support: improving
access to mortgage finance, increasing housing
supply and contributing to economic growth.
However, the Department for Communities and
Local Government does not understand the
overall impact of its housing strategy and the
combined effectiveness of its different
initiatives.”
The IMF noted that the housing sector needs to
become more stable, and that policymakers
should take early action in order to moderate
housing booms.
A comprehensive evaluation will be carried out
in 2015, which will look at three areas. These
are whether builders have constructed more
houses than they would have, if more people
bought properties than they would have without
the scheme and what effect Help to Buy could
have on property prices.
.
IMF deputy managing director Min
Zhu said: “The era of benign neglect of
housing booms is over.”
He added: “Of all these potential indicators of
the risk of a boom-bust cycle, IMF research
suggests it is particularly important to monitor
credit growth. We find that there is a
distinguishing feature of real estate booms that
go ‘bad’: this feature is the coincidence between
the housing boom and the rapid increase in
leverage and exposure of households and
financial intermediaries.”
The Help to Buy scheme has
left taxpayers at risk.
This is according to the Public Accounts
Committee, which said £10 billion has been
spent on Help to Buy.
Chair of the committee The Rt Hon
Margaret Hodge MP said: “The
government has yet to demonstrate that the
Help to Buy scheme provides value for money.
The scheme was up and running quickly, with
nearly 13,000 homes purchased with the
support of Help to Buy in its first nine months.
Lloyds Banking Group has
announced the initial public
offering pricing of TSB.
The offer price stands at 260 p per ordinary
share, making TSB’s market capitalisation
approximately £1.3 billion. The offer consists of
175 million existing TSB ordinary shares being
sold by laws, making up 35% of the 500 million
shares that will be in issue at admission.
“TSB has a national network of branches, a
strong capital base, robust liquidity and
significant economic protection against legacy
issues. It is already operating on the UK high
street and is proving to be a strong and effective
challenger, further enhancing competition in the
UK banking sector,” said Lloyds Banking
Group chief executive Antonio HortaOsorio.
Top News Stories
Ed Miliband has laid out
new rules regarding
unemployment benefits.
Should Labour come into power following next
year’s General Election, a new youth
allowance for those with no qualifications will
replace Job Seekers’ Allowance. This new
payment would be dependent on young
people being in training and will target those
who require the benefit the most.
The means testing will result in those with a
household income of more than £42,000 a
year not being entitled to the new allowance.
“Britain’s young people who don’t have the
skills they need for work should be in training
not on benefits,” Mr Miliband said.
Martin Wheatley has said it
was “disappointing” how
some banks have
interpreted the Mortgage
Market Review (MMR).
The Daily Mail has revealed that some banks
have stopped customers from switching to
cheaper deals by citing the strict MMR rules as
a reason why.
However, the Financial Conduct Authority’s
chief executive commented: “It shows some
lenders are not approaching the rules in the
spirit that they were intended. They have to
decide what level of risk they are prepared to
take. That’s reasonable.
“But every firm also has a responsibility to treat
their customers fairly and we would expect them
to put good customer outcomes at the heart of
everything they do. Leaving customers on
higher-rate deals doesn’t fit with either of those
criteria,” the newspaper added.
Bank of England Monetary
Policy Committee member
David Miles has said he
would more than likely vote
for a base rate rise.
Writing in the Daily Telegraph, he stated it is
increasingly likely that he would vote for the rate
hike before leaving the committee in May.
Mr Miles said in the newspaper:
“Having Bank Rate at 0.5 per cent is obviously
not a normal or sustainable setting for monetary
policy. We have had such low rates because
the economy took a huge hit in the aftermath of
the financial crisis of 2008. Until fairly recently
we have not had any sort of sustained recovery
from that. Now we have one.
“Thankfully it is proceeding while inflation
remains subdued. Following a long period when
it was above the two per cent target, inflation
has dropped back to under two per cent.
“So the process of normalising interest rates,
when it starts, looks to me likely to be one taken
because of the resilience of the recovery rather
than because of a need to react to excessively
high inflation.”