1. COUNCIL of MORTGAGE LENDERS 1 The Mortgage Event 2004 Housing Market Review: Overview of latest developments Alex Solomon CML Senior Policy Adviser 27 September 2004

2. COUNCIL of MORTGAGE LENDERS 2 The Mortgage Event 2004 Housing Market Review: Overview of latest developments Bernard Clarke CML Communications Manager 29 September 2004

3. COUNCIL of MORTGAGE LENDERS 3 The Mortgage Event 2004 Housing Market Review: Overview of latest developments Jackie Bennett CML Senior Policy Adviser 30 September 2004

4. COUNCIL of MORTGAGE LENDERS 4 The Mortgage Event 2004 Housing Market Review: Overview of latest developments Alex Solomon CML Senior Policy Adviser 4 October 2004

5. COUNCIL of MORTGAGE LENDERS 5 The Mortgage Event 2004 Housing Market Review: Overview of latest developments Bob Pannell CML Head of Research and Information 11 October 2004

6. COUNCIL of MORTGAGE LENDERS 6 The Mortgage Event 2004 Housing Market Review: Overview of latest developments Andrew Heywood CML Senior Policy Adviser 12 October 2004

7. COUNCIL of MORTGAGE LENDERS 7 The Mortgage Event 2004 Housing Market Review: Overview of latest developments Jennet Vass CML Senior Economist 14 October 2004

8. COUNCIL of MORTGAGE LENDERS 8 What we’ll cover … CML market view/forecast Sectoral issues (buy-to-let and other niche) Risk/affordability (what can be improved) Operational/distribution issues (e-business) The consumer and regulatory environment Tax and benefits Emerging agendas

9. COUNCIL of MORTGAGE LENDERS 9 CML market view/forecast

10. COUNCIL of MORTGAGE LENDERS 10 Sectoral issues – Buy-to-let current position Typical max loan to value80% Percentage of all new lending 8.29% Re-mortgage rate39% Minimum Rental cover 130% (constant 5yrs) Arrears (3 months+)0.42%

11. COUNCIL of MORTGAGE LENDERS 11 Buy-to-let - volumes

12. COUNCIL of MORTGAGE LENDERS 12 Buy-to-let - issues Income v Cost Voids Rental yields Interest rates Multiple exposure of many new landlords What if the property market turns down? Government intervention PIFs/REITs – a competitor to BTL?

13. COUNCIL of MORTGAGE LENDERS 13 Sectoral issues – non- conforming No hard data on size of market But number of providers suggests increase More than just sub-prime! A blurred boundary between non- conforming and income non-verified/self- cert.

14. COUNCIL of MORTGAGE LENDERS 14 Income non-verified - market size Includes self-cert and fast-track Recent CML survey suggests 30 out of 53 lenders surveyed undertook INV lending Estimated total INV loans of £147bn - 19.2% of total balances 6.1% of balances outstanding are self- cert Remaining 13% are fast-track mortgages.

15. COUNCIL of MORTGAGE LENDERS 15 Income non-verified - issues External perception of INV being over-used Allegations of INV prompting exaggerated declarations of income But FSA’s “Dear CEO” letter concluded firms had sufficient controls in place Nevertheless caution still needed in this marketplace.

16. COUNCIL of MORTGAGE LENDERS 16 Sectoral issues – lifetime mortgages Balances outstanding£3.3 bn Number of loans71,500 approx New advances H1 2004£517 m New advances H2 2003£597 m New advances H1 2003£504 m

17. COUNCIL of MORTGAGE LENDERS 17 Lifetime mortgages - issues Regulation – what impact will it have? Advised sales Staff training The future of home reversion schemes To be regulated – but when? Another “tread with caution” market – but one with huge potential over the long term.

18. COUNCIL of MORTGAGE LENDERS 18 Risk and affordability – a growing agenda … Sustainable home-ownership not just MPPI! Range of ways of offsetting risks Insurance/employer/savings/flexible finance The FSA risk leaflet The new MCOB requirements Pre-sale disclosure and post-sale arrears management Watch the Financial Capability initiative!

19. COUNCIL of MORTGAGE LENDERS 19 Look what’s happened to prices …

20. COUNCIL of MORTGAGE LENDERS 20 FTBs are seeing payments rise beyond reach …

21. COUNCIL of MORTGAGE LENDERS 21 Interest rates going up …

22. COUNCIL of MORTGAGE LENDERS 22 Result? A decline in FTBs

23. COUNCIL of MORTGAGE LENDERS 23 And the market will be influenced by housing issues The Housing Bill will introduce HIPs – effective from Jan 2007? Assuming the technical issues get resolved … HIP could influence the mortgage sales process Compiling the HIP may give a timing advantage to reaching the customer Housing supply post-Barker Likely to be a slow-burn issue CML supports increased intermediate tenure

24. COUNCIL of MORTGAGE LENDERS 24 Distribution post-regulation could change It looks as if most intermediaries will continue Directly authorised/AR split suggests similar market offerings to the present KFIs will be ready/compliant to best of CML knowledge But how regulation will influence distribution long-term still not clear (panels)

25. COUNCIL of MORTGAGE LENDERS 25 e-conveyancing should help efficiency CML greatly supports the concept of e- conveyancing There is now a legal framework for e- conveyancing and the Land Registry is taking forward the practical implementation The Land Registry is aiming at achieving a fully-functioning system by 2007.

26. COUNCIL of MORTGAGE LENDERS 26 Other e-initiatives to be aware of NLIS The National Land Information Service, an online one-stop-shop for property search information. 49 local authorities (out of 375) are now fully operational under NLIS. PISCES PISCES is a cross-platform protocol to enable different computer systems to communicate. This would help lenders, surveyors, estate agents and conveyancers. Intermediaries?

27. COUNCIL of MORTGAGE LENDERS 27 The consumer is king? Treating customers fairly A key FSA theme, and Miles follow-up expected in pre-Budget Endowment complaints To time-bar or not to time-bar? CML view is that certainty/closure is needed Financial capability The next “big thing” – intermediaries a key potential delivery channel?

28. COUNCIL of MORTGAGE LENDERS 28 Tax and benefits – stamp duty Stamp Duty system is anachronistic Starting £60k threshold would be approx £150k if index-linked in line with house price inflation And system should be reformed to prevent “bunching” below thresholds Government and opposition appear to be interested Reform could be revenue-neutral so there is some hope!

29. COUNCIL of MORTGAGE LENDERS 29 Tax and benefits – tax credits Around £1 billion pa in tax credits goes unclaimed by home-owners Intermediaries can really add value to clients by alerting them Not just for low-income households - moderate-income households (up to £58k for new child tax credit) can benefit – check eligibility criteria via Inland Revenue website.

30. COUNCIL of MORTGAGE LENDERS 30 To end … the rising subjects Early days but watch out for … Financial capability Treating customers fairly Implementation of Basel 2 (effect on pricing) More flexible/creative housing and housing finance public policy.

31. COUNCIL of MORTGAGE LENDERS 31 Contact us! www.cml.org.uk bernard.clarke@cml.org.uk alex.solomon@cml.org.uk jackie.bennett@cml.org.uk jennet.vass@cml.org.uk andrew.heywood@cml.org.uk bob.pannell@cml.org.uk