1 The Lenders’ Perspective Society for Licensed Conveyancers Annual Conference Paul Broadhead Head of Mortgage Policy, Building Societies Association 12 November 2014

2 1.The mortgage lending market 2.Mortgage Market Review – The first six months 3.The impact of Government Intervention - Funding for Lending - Help to Buy - FPC intervention 3.Mortgage Credit Directive 4.The consumer outlook Contents

3 Mortgage market in numbers Gross lending, £ million f = BSA forecast Source Bank of England

4 Mortgage market in numbers Net lending, £ million f = BSA forecast Source Bank of England

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6 The Mortgage Inquisition – could spell the end of cheap fixed rates - Daily mail The rise and fall of interest-only mortgages - Citywire Now a bikini wax can cost you your house - Daily Mail Mortgage prisoners are locked into home loans - BBC News MMR – The warnings

7 Affordability changes - Some oddities early on but settling down Fully advised market - Appointment delays at large banks have provided opportunities for small lenders and intermediaries Post contractual variations - Some inconsistency of approach Transitional rules - Not widely used for “new” customers MMR – The first six months reality

8 The Impact of Government Intervention - Funding for Lending - Help to Buy - FPC intervention

9 FLS impact

10 FLS impact

11 Help to Buy – Equity Loan Help to Buy (1): equity loan Government scheme – applies to new build properties up to £600,000 Launched April ,911 properties bought to 30 September % of purchasers are First Time Buyers

12 Help to Buy – Mortgage Guarantee Help to Buy (2): mortgage guarantee Government offers lenders the option to purchase a guarantee on the loans they supply (above 80% LTV). Aim is that lenders will offer higher LTV mortgages up to 95%. No Building Societies signed up 18, 564 mortgage completed in first 9 months of the scheme 79% first time buyers Largest take up is outside London & the South East

13 Financial Policy Committee LTI Limits - Arbitrary limits should be avoided - May not bite now but could drive consumers to other credit in the future Affordability Stress Tests - Market expections - Any prevailing FPC recommendation (currently +3% on BBR at origination)

14 MCD timeline HM Treasury Published consultation on 5 September Closing date was 31 October The UK government needs to make changes to legislation Aiming to finalise required measures by March 2015 To achieve this, final legislation must be laid in Parliament in early FCA Published consultation on 25 September Closing 29 December 2014 Sets out proposed approach to implementing MCD – largely through reliance on existing rules. Aiming to publish final rules in a policy statement by the end of Q

15 No mention other than Credit Agreements beyond March 2016 are captured. Seems appropriate to us that the definition should refer to the current, conditional mortgage offer. These offers are robust and not routinely withdrawn. Mortgage Credit Directive Transitional Arrangements

16 MCD requires offer to be binding FCA aim to make the process as simple as possible 7 day period to reflect Customer has the right to withdraw Conveyancing process has an additional step Binding Offer 7 day reflection period

17 The Consumer Outlook

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19 Affordability remains a challenge

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21 The Lenders’ Perspective Society for Licensed Conveyancers Annual Conference Paul Broadhead Head of Mortgage Policy, Building Societies Association 12 November 2014