Re-building confidence in the lending market, Working Party on Land Registration UNECE 2012, London, Paul Broadhead
Rebuilding confidence in the lending market: The role of UK Building Societies and mutuals Presentation to Working Party on Land Administration United Nations Economic Commission for Europe 11 October 2012 Paul Broadhead Head of Mortgage Policy The Building Societies Association
Agenda• What are Building Societies?• Perception of financial services and the deficit of trust• Housing market• Horizon Scan• Falling home ownership• The future of land registration?
Overview of Building Societies (plus the Co-operative Bank) Approx Data 2011• 47 building societies – very large to very small• 50,000 staff (full and part-time)• Just under 2,000 branches• 2,500 ATMs• 20 million investing members• 2.6 million borrowers• £375 billion assets• 75% retail funded• 87% residential mortgage lending• £442 million post-tax profit 2011• 20% of outstanding mortgages & 22% deposit savings
Opportunities• Mutuals are long-term institutions, well able to withstand short-term variations in activity• Current distrust of banks – mutuality, and “localness”, the obvious alternative• Demutualisation failed• High customer service levels – including trust• Even if markets are quiet for now still a huge housing need• Many housing initiatives – self-build, shared ownership/equity, local market knowledge, Housing Hub• On many savings initiatives – ISAs, CTF, JISAs – ahead of the market• Innovative capital instruments
Mutuals: Better customer serviceAn independent survey published in July 2012 showed that Mutuals outscore plc banks on these measures:• Looks after the communities it operates in• Offers reasonable value for money• Customers trust them to act in their best interests• Values the customer• Deals with complaints quickly and effectively
The Economy and Markets• GDP growth around 1% pa• Unemployment rising, inflation falling (except last set of statistics)• House prices stable – but regional variations• Owner-occupation falling sharply – down 0.5% a year from 2003-10. Down 1.4% in 2011.• Private rented sector up from 10% in 2000 to 16.5% in 2011
English Household Survey February 2012• Owner occupiers:14.45 million in 2011.Down from a peak of 14.79 million in 2005• Owner occupiers buying with a mortgage made average weekly mortgage payments of £143 (€177; $229)• Average weekly rent payments of private renting households £160 (€198; $257)• Average weekly rent payments of social renting households £79 (€98; $127)• 59% of private renters and 23% of social renters said they expected to buy a home in the UK at some point.
Consumer DemandNow is a good time to buy property in the UK?60% Agree40% 44% Net20% 20% agreement 0%-20% -24% Disagree-40% (-ve)-60% Jun-08 Jun-09 Jun-11 Jun-10 Sep-08 Dec-09 Sep-11 Dec-08 Mar-09 Sep-09 Mar-10 Sep-10 Dec-10 Mar-11 Dec-11 Mar-12
Consumer DemandPerceived barriers to property purchase Raising a deposit70% 64% Access to sufficient60% mortgage finance 56%50% 53% Lack of job security40% 39%30% Affordability of monthly mortgage20% 18% repayments 12% Concern about future10% falls in property prices0% Stamp Duty costs Mar-09 Mar-10 Mar-11 Mar-12 Jun-08 Sep-08 Dec-08 Jun-09 Sep-09 Dec-09 Jun-10 Sep-10 Dec-10 Jun-11 Sep-11 Dec-11
BSA Property Tracker• Consumers say that credit conditions have eased in September• Only 3% of buyers put off from property purchase have been refused a mortgage previously• 23% of first time buyers are put off buying a property due to a fear of being refused a mortgage• More people think now is a good time to buy a property compared to June 2012.
Recent Performance• Customer preference swings further in favour of building societies and mutuals• Trust in building societies remains solid• Gross lending up 38% in H12012 v H12011• Mortgage approvals up 45%• Lending has grown each month this year on a year on year basis
Mortgage Regulation Mortgage Market Review• Final rules expected soon• Rules will be accompanied by a robust impact assessment• Lord Turner has called for a wide ranging debate on the final proposals BSA messages• Impact assessment must take into account welfare impacts, other regulatory initiatives and impact of specific consumer groups• Debate must be inclusive, not exclusive• Transitional arrangements are critical in order not to disadvantage existing mortgage holders
EU Directive on Mortgage Credit• Proposed Directive published March 2011• Key Concerns: – The inclusion within the scope of the Directive of Buy To Let mortgages – Provision of advice (the text currently suggests that to give advice, lenders will be required to advise on products from across the market) – Pre-contractual disclosure (the potential replacement of the KFI with the European Standardised Information Sheet (ESIS)).• Still a long way to go: – “Trilogue” negotiations have started but this Directive is not a priority – Concerns remain, but there are also some positives – Final vote in plenary session of European Parliament is scheduled for December 2012 but expected to slip.• MMR will not wait
Government Housing Strategy• "Laying the Foundations: A Housing Strategy for England" published in November 2011.• Sets out the problems well, but has limited answers for tackling them.• Focussed on owner occupied and social housing, with shorter sections on the private rented sector.• Much of the document sets out schemes for providing new homes• Of primary interest to lenders are the new Right To Buy Scheme, the NewBuy Scheme and support for self build
CQS• Lenders welcome schemes from regulators to improve standards in conveyancing and to tackle fraud by solicitors.• The Law Society’s Conveyancing Quality Scheme is a good example of how solicitors can flag to lenders that they are experienced in conveyancing and have robust procedures in place to ensure quality. Many lenders are beginning to require CQS or an equivalent standard in order to gain access to conveyancing panels.• Any quality marks must be robustly policed and enforcement action taken against any firms not meeting standards.
New technology and land registration• The consumer journey for buying property in the UK is long and confusing.• The number of professionals involved in a property transaction, the various processes they must go through and lack of automation contribute to lengthy transaction times.• We welcome advances in technology which will speed up the process, improve the consumer experience and help to reduce property fraud.
Rebuilding confidence in the lending market: The role of UK Building Societies Presentation to Working Party on Land Administration United Nations Economic Commission for Europe 11 October 2012 Paul Broadhead Head of Mortgage Policy The Building Societies Association