1. HOUSING SUMMIT 2013 Thursday 17 October 2013 The Mortgage and Housing Markets Adrian Coles Director-General The Building Societies Association

2. Gross Mortgage Lending

3. Net Mortgage Lending

4. Funding for Lending Scheme

5. High LTV Lending by Mutuals

6. Help to Buy: Mortgage Guarantees – Issues for Lenders Cost Complexity Certainty (of continuation of scheme) Existing market relationships Business model Capital relief – PRA – sound underwriting – safety of institutions Consumer understanding of costs and benefits – FCA – safety of consumers Other regulatory priorities – eg MMR, ring-fencing

7. Residential Transactions: Annual

8. Residential Transactions: Quarterly

9. House Price Growth: Annual

10. House Prices: Regional

11. House Price Growth: Quarterly

12. Regional House Price Growth: 2012-13

13. Real House Prices

14. House Price to Earnings Ratio

15. Mortgage Payments as % of Income

16. House Building: Annual

17. House Building: Quarterly

18. The FPC View – 18 September 2013 "... the recovery in the housing market appeared to have gained momentum and to be broadening. Mortgage approvals in July were 30% higher than a year earlier and average house prices in August were 5% higher than a year earlier and had risen more in some parts of the country, particularly London. Nevertheless, activity in the housing market and loan-to-value ratios on new mortgage lending remained below their historic averages. Households’ debt servicing costs were low and the ratio of house prices to earnings was at its level of a decade ago. In view of that, the Committee judged that it should closely monitor developments in the housing market and banks' underwriting standards….

19. The FPC View – 18 September 2013... The Committee would be vigilant to potential emerging vulnerabilities. The Committee noted that if risks to the stability of the financial system were to emerge from the housing market, both it and the micro-prudential regulators had a range of tools available to address those risks. These included, amongst others, supervisory guidance on underwriting standards, sectoral capital requirements and recommendations to the regulators on tightening of affordability tests. The Committee agreed that, if it became necessary to deploy its tools, they would be used in a way that was proportionate to the risks and consistent with a graduated response. "

20. Housing Market Subsidies + Transfers Help to Buy – Equity Loan: £3.5 billion Help to Buy – Mortgage Indemnity: £12 billion potential Funding for Lending Scheme: £1 billion / year Total subsidy = £16.5 billion Less additional stamp duty receipts: £1 billion Net subsidy = £15.5 billion Erosion of real value of UK savings: each 1% loss on £1.2 trillion means £12 billion of transfer Increase in real value of housing stock: each 1% gain on total house values of £4.2 trillion means £42 billion of transfer

21. Housing market subsidies from….to…. Savers to borrowers (old to young) – low interest rates. Home buyers to home sellers (young to old) – rising house prices To house builders – higher prices and activity To lenders – wider margins and more loans To transactional agents Borrowers to tax-payer – or the reverse? Overall beneficiaries are?

22. HOUSING SUMMIT 2013 Thursday 17 October 2013 The Mortgage and Housing Markets Adrian Coles Director-General The Building Societies Association