FSA

The FSA keynote speech on the final day of the Expo, speaking on the update on the mortgage market, said bridging loans have clear benefits for consumers but brokers and intermediaries should be weary of putting bridging finance to a client in inappropriate circumstances. Sheila Nicholl, Director of Conduct Policy at the FSA, revealed that bridging is very much on the radar of the regulator. However, they reiterated the importance of intermediaries, especially with the constricted lending environment and how they can really help borrowers find access to funds.

The new EU directive on mortgages will have wide potential implications for consumers and lenders in the UK. It places emphasis on the lender to lend responsibly and obliges member states to consider consumers’ best interests and focus on greater professionalism.

Nicholl said: “The Directive will focus on the mass market. However, niche markets – bridging, buy to let – are more local in character and we [FSA] are concerned that there are risks involved if niche lending is governed by broad regulation designed for mainstream products. Consumer choice may suffer as a result.

In response to a question about whether the EU directive will have a negative impact on the UK’s existing quality benchmarks, Nicholl replied: “The FSA have no intention to move the UK level 3 qualification benchmark.”

Another creative solution involves consumers taking out 'buy-to-let' mortgages and then moving in to the property. Brokers should take care in such cases as they could find themselves involved in a fraud.

Fraud

Mortgage fraud accounts for roughly around £1 billion a year in the UK and how the ‘Fighting Fraud Together’ strategy is helping to bring trade bodies, solicitors, intermediaries and lenders together.

EU Directive

Isabele Audigier and Rebekka De Nie, Legal Directors at BIPAR, both spoke about the European mortgage market directive and how BIPAR feel that niche products – such as bridging and buy to let – shouldn’t be regulated in the same way as mainstream, traditional mortgage lenders and intermediaries, as they are specialist areas and the MEPs drafting the directive do not have the specialist knowledge. BIPAR are fighting to keep such niche products out of the directive and feel that these products should really be regulated on a national basis.

BIPAR believe that there is also a lack of supervision and registration of intermediaries, even in regulated markets like the UK. The Directive should be adopted in two years and BIPAR have sought to influence at a very early stage, proposing amendments, suggestions etc.

BIPAR are the trade body that represents the interests of intermediaries across Europe. AMI are members and work with BIPAR to represent UK interests in Brussels.

Buy-To-Let

Lee Gladwell, Director of Business Development at Platform, said, “We expect to see a significant rise in Buy-to-Let. If High Street lending becomes more restricted through 2012; a greater proportion of funds will be lent through intermediaries so their share of the market is expected to grow.”

In another seminar, James Chidgey from Nationwide for Intermediaries, stated that if a broker or an intermediary is not writing 15% on average on BTL then they are not utilising their business effectively. There is strong tenant and investor demand at the moment.

CML recently indicated that there was an increase of 19 per cent in Quarter 3 from Quarter 2 this year. Quarter 3 saw £3.8 billion of new loans. There is potential for £20 billion of loans to be made in 2012.

Chidgey believes the FSA seem to be pro-regulation and the regulation will probably come in over the next two to three years. Our BTL market is very unique, unlike Europe. BTL should not be under the new regulation. It’s not a home buying transaction it’s a business one.

MMR

The FSA announced that the Mortgage Market Review is in the process of final analysis before going through a long and intensive consultation process.

The Future

Some of the UK’s top mortgage lenders predicted how gross lending figures in 2012 are likely to be £130-135 billion and will rise to £140-145 billion the following year.

David Finlay, Managing Director of mortgages at Barclays, stated, “Reforming credit scoring and re-evaluating LTVs needs to happen going forward.”

Finlay said that European Buy to Let regulation, “Is coming whether we like it or not. Landlords need protection which undoubtedly will come in the form of regulation. There is already lots of restriction and red tape in place so in practice not much is likely to change.”

Government can help the mortgage market by establishing a ‘common vision’ between lenders and government.

There is no room for self-certification in the current market but better quality underwriting may improve this sector of the market.

Brokers should look towards expanding into advice – this is what will help stabilise the market because better education mean that borrowers are less likely to default and lenders are lending to better qualified customers.

Broker Reaction

Martin Smith of MTS Accountancy Services told us: “Our main business is mortgages, but I have had four bridging loans in the last year, the cheapest of which was for £1 million. Bridging has grown in popularity as other forms of finance have become harder to obtain.

“The event itself has got a lot smaller. A few years ago there were 50-60,000 advisors, now there are only about 70. However, the FSA told me that they have recently been inundated with requests to be directly authorised.”

Andrew Hosford, Voltaire Financial, told us, “The turnout has been excellent and the Expo has serviced all of my needs.”

Nandishwar Kaushal said, “The Expo is such a great way for making new contacts.”

MBE 2011

Roughly one fifth of the exhibitors at the Expo this year were from the short term bridging loan world, which emphasises the big part bridging has and will have in helping the mainstream mortgage market. This in itself indicates how the bridging industry has come on leaps and bounds over the past year. “The Mortgage Business Expo team would like to thank all of their sponsors, exhibitors, partners and visitors for making MBE 2011 a highly successful event for all attendees.”

By Jason McGee-Abe