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November 2014 UK Commercial Bulletin


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Here you can find everything you need to know about the UK's financial services sector, including the latest house price, base rate, inflation and unemployment figures.

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November 2014 UK Commercial Bulletin

  1. 1. November 2014 Computershare has received official approval from the FCA for the acquisition of HML HML has won two MFG Awards and been Highly Commended for a further two Repossessions declined to 5,000 during Q3 2014, the CML says
  2. 2. HML News The Financial Conduct Authority has approved the purchase of HML by global financial services company Computershare. HML has been purchased by Computershare in order to extend its mortgage servicing business into the UK. Computershare plans to invest in the mortgage servicer, grow it and provide the scale and capital to allow it to take advantage of developing opportunities. Computershare provides financial and governance services across 22 countries on five continents and employs more than 15,000 people worldwide, with an annual global turnover of approximately US$2 billion (£1.2 billion), and already owns a mortgage servicing business in the USA. In the UK, Computershare is based in Bristol, Edinburgh, Halifax, London and Jersey; and will retain HML‟s office locations. Andrew Jones, chief executive officer of HML, said: “Computershare becoming our parent company is excellent news for the business and those who work at HML, as well as our clients and their customers. “Computershare is committed to investing in and growing HML, allowing us to continue to be the leading third-party mortgage administration company in the UK and Ireland. With the desire to grow the business and develop the specialist expertise that HML has, it‟s clear to me that culturally we are much aligned with Computershare. “HML has had 25 years of successfully delivering value to clients, customers and our people and this deal will secure the future of the company for many more years to come.” Naz Sarkar, regional chief executive officer of Computershare, said: “We‟re pleased to welcome HML to the Computershare group and I‟m delighted that Andrew and his senior team will be remaining with the business. Several experienced Computershare staff will be relocating to Skipton to supplement the HML team and assist with the transition to Computershare. Together, we‟re excited at the opportunities that lie ahead.”
  3. 3. HML News HML has won two MFG Awards. The company took home the Customer Service/Treating Customers Fairly Award in the Mortgage Servicing Companies category and the Best Debt and Arrears Strategy Award. HML also achieved Highly Commended in both the Innovation (Non-Lenders) and Best Use of Technology (Non-Lenders) categories. The two award wins follows last year‟s success, where the financial outsourcer won three MFG Awards in the Best Use of Technology, Innovation and Best Debt and Arrears Strategy categories. HML has won the competitive latter category for the third year in a row. Andrew Jones, chief executive officer of HML, said: “It is fantastic news that HML has won two awards and has been awarded Highly Commended in two more categories. The fact we have been recognised for our customer service and arrears and debt management is particularly important, as we continue to be a market leader for quality within the mortgage industry. “Taking home the Best Debt and Arrears Strategy Award for the third consecutive year is testament to our focus on appropriate outcomes for customers, which lies at the centre of our clients‟ debt and arrears management strategies.” Best Debt and Arrears Strategy HML won this award for its two-pronged arrears management approach for a UK client that wanted to support those borrowers at risk of falling into arrears and increase payment on underpaying accounts. Each customer‟s case was managed in accordance with their particular circumstances, with the appropriate support applied. HML implemented call campaigns targeting those borrowers who, based on its advanced analytics, were considered to be most at risk of falling into arrears in the near term. Early contact is key, as it gives borrowers more time to assess their finances and work towards a sustainable solution with their lender. Ian Carr, portfolio servicing director at HML, said: “By enhancing customer engagement through early contact, customers can enjoy better financial outcomes and targeted support. It is fantastic that our arrears management strategy has once again been recognised among respected industry peers.” Customer Service/Treating Customers Fairly HML won this award for Destination 100%, its evolutionary journey to a total quality concept in the third-party mortgage administration sector. HML wants to set a market-leading quality benchmark and support the financial services sector to be preventative against poor customer outcomes rather than reactionary, which the sector traditionally is. Pushing the quality boundaries in the UK and Ireland‟s outsourcing sector reduces the tolerance for poor customer outcomes, something which is deemed as good practice by the Financial Conduct Authority. Richard Wade, customer service director at HML, said: “It is testament to the hard work of everyone at HML that our drive to be a market leader for quality has been recognised by such an esteemed publication as Mortgage Finance Gazette. This stands us in good stead to further push the market‟s quality boundaries in 2015 and beyond.”
  4. 4. HML News 76% of people think the base rate will rise after the General Election. In October, HML launched its base rate survey and asked when people thought the Bank of England would increase the base rate. The choices were: •During Q4 2014 •During Q1 2015 •During April 2015 •During May 2015 •After the General Election Despite the then optimism of Philip Shaw from Investec who said a rate rise could occur in November, none of the respondents thought the 0.5% rate would increase during Q4 2014. Back in October, Mr Shaw said the rise could happen in November “not least because we struggle to envisage the committee either beginning to tighten in the first few months of next year, so close to May‟s General Election, or waiting as long until the summer”. In an update earlier this month, Mr Shaw said he now believes the first base rate rise will occur in August 2015 due to a “cautiously dovish tone” within the Monetary Policy Committee. The survey found that 8% of respondents thought the rate could rise during Q1 2015 and 16% believed it may happen during April 2015. However, as Mr Shaw alluded to, none of those who responded to the HML survey thought a rate increase would happen in May, perhaps with this being too close to the General Election. Instead, 76% stated that the base rate would rise after the General Election. Comments included: “I think too many factors are indicating uncertainty in the market and therefore I anticipate that decisions on interest rates will be delayed until some of the market trends can be assessed and analysed. I think the view from the Monetary Policy Committee will be to not rock the boat at this point in time.”
  5. 5. HML News Paul Smee, director-general of the CML, provides his thoughts on the recent Annual Conference. As we planned the 2014 CML Mortgage industry conference, one thought was uppermost in my mind. How on earth would we fill the gap previously filled - to overflowing - by MMR? MMR, the consultation(s); MMR, the implementation; MMR the unintended market consequences. Always good for a slot or two, since the start of the decade. And now in 2014, the conference could no longer rely on this staple prop to fill the day. If only there had been a few more glitches in the industry‟s implementation, we could have wrung another hour or two from the subject. True, we listened to an excellent speech from Linda Woodall on regulatory issues in general (and was I the only delegate to detect the Financial Conduct Authority (FCA) now has more troublesome fish to fry than mortgage lenders?). The text on the FCA website is well worth a read. But then we could actually move on to look at the future and some bigger pictures. Nigel Wilson, Chief Executive of Legal and General, set the visionary tone with a really inspirational description of how he wants to see more houses built for all tenures to occupy; he placed housing at the heart of UK social policy, its rightful place but one from which it keeps getting bumped by more transitory concerns. I was amazed that it now ranks eleventh on a list of public worries in a recent IPSOS Mori poll. CML Chairman, Stephen Noakes of LBG, chipped in to remind us of the scale and importance of the mortgage sector. The total stock of UK mortgages apparently is larger than the GDP of Canada; a statistic which is going to be given a lot of airtime by me in the future, (but probably not if I am asked to speak in Canada). It is so important that the sector appreciates quite how central its role is to economic life in the UK. The minutiae of how business is conducted is a worthy subject but should not be all consuming. We will need to set out where and how the sector contributes to the national wellbeing, especially as we approach an election year. Looking to the future There are many ways of looking to the future. One of the best is to identify new talent. In a new initiative, the CML ran a rising stars competition and attracted some really interesting answers to the statement “If I could improve the mortgage industry, I would….”. Four finalists whose proposals really stood out were quizzed on the CML stage and Michael Rhodes of Leeds Building Society won the popular vote and the top prize with his idea for a new sort of tax-incentivised, deposit-builder savings scheme. Well done to him and all the other finalists, Neil Hoare of Personal Touch, Lynn Jones of Kensington Mortgages and Ben Morgan of RBS. I hope that all the excitements of the next regulatory onslaught - the Mortgage Credit Directive - do not get in the way of an equally forward-looking conference in 2015.
  6. 6. Industry Statistics *Date reflects what the statistic was during that period, rather than when the statistic was published ** Figure has since been revised downwards to £18 billion OCT ‟14 SEP ‟14 AUGUST ‟14 Consumer Prices Index 1.3% 1.2% 1.5% NOV ‟14 OCT ‟14 SEP ‟14 BoE Base Rate 0.5% 0.5% 0.5% JUL-SEP „14 JUNE-AUG „14 MAY-JULY „14 Unemployment Rate (ONS) 6.0% 6.0% 6.2% OCT „14 SEP „14 AUG „14 Halifax House Price Index Down 0.4% on SEP Up 0.6% on AUG Down 0.1% on JULY Average price Average price Average price £186,135 £187,188 £186,270 Gross Mortgage Lending (CML) OCT „14 SEP „14 AUGUST „14 Up 5% on SEP Down 1% on AUG Down 5% on JULY £19 billion £17.8 billion £18.6 billion** Home Repossessions (CML) JULY-SEP ‟14 APR-JUNE ‟14 JAN-MAR ‟14 5,000 5,400 6,400
  7. 7. Industry Statistics Consumer Prices Index The CPI increased by 0.1% on September to 1.3% in October. Smaller falls in transport costs contributed to the rise in the rate. This was partially offset by reductions in food and motor fuels prices. BoE Base Rate The Bank of England kept the base rate at 0.5%, as well as the stock of asset purchases at £375 billion. Martin Weale and Ian McCafferty split the MPC 7-2 and wanted to increase the base rate by 25 basis points. Halifax House Price Index The average price of a home decreased by 0.4% between September and October to £186,135. Values in October were 8.8% higher than the same month in 2013. Housing economist at Halifax Martin Ellis said: “Activity continues to decline with mortgage approvals in September falling for the third successive month to a 14-month low, whilst home sales are at their lowest level since October 2013. The associated weakening in demand has brought supply and demand into better balance. “The economy is, however, continuing to grow at a healthy pace and employment is still rising. These factors should support housing demand over the coming months. However, while the chances of an imminent interest rate hike may have receded, a recent Halifax survey found that many borrowers are concerned about the impact a rise could have on their monthly mortgage repayments over the next 12 months. This concern is likely to curb buying intentions.” Unemployment Rate The unemployment rate for July to September stood at 6%, representing 1.96 million people. There were 30.79 million people in work, an increase of 694,000 compared to a year earlier. Gross Mortgage Lending Gross mortgage lending stood at £19 billion in October, 5% higher than September and 8% up on the same month in 2013. CML economist Mohammad Jamei said: “While the housing market has cooled in recent months, mortgage lending continues to be underpinned by positive factors. With expectations of the first interest rate rise moving to the fourth quarter of next year, as well as positive forecasts for growth, pay and unemployment, there is potential for market activity to gain traction in the new year.” Home Repossessions Repossessions declined to 5,000 for Q3 2014, down from 5,400 during the previous three- month period, the CML revealed. This is the lowest number since quarterly records began in 2008. Paul Smee, director-general of the CML, said: “Encouragingly, recent research also suggests that many households are preparing themselves for the prospect of higher interest rates, so we expect any uptick in payment difficulties to be relatively muted if and when rates do begin rising.
  8. 8. Top News Stories . Yorkshire and Clydesdale Banks are set to float on the market. According to a report in the Daily Telegraph, National Australia Bank is currently planning for a £2 billion stockmarket float of the lenders. In addition, it noted that Morgan Stanley has been appointed to lead the listing. This follows National Australia Bank posting a fall in profits, partly contributed to by compensating customers for mis-sold PPI and having to write-off billions of pounds of bad debts. For the full year to 30 September 2014, National Australia Bank reported group net profit of $5.3 billion (£3.4 billion), a fall of 1.1% - or $60 million. Andrew Thorburn, chief executive of National Australia Bank, told reporters: “We have an intention to exit the UK, we think there's an opportunity now that probably wasn't there before. What we are signalling is that's our intent, it is an absolute priority.” In the full year to 30 September 2014, pre-tax cash earnings at Yorkshire and Clydesdale Banks climbed by 90% to £203 million. Underlying profits, meanwhile, stood at £283 million, a 7% increase. IMLA has voiced concerns about older borrowers securing a mortgage. A new report notes that concerns about future lending regulation could see older borrowers be blocked from obtaining a mortgage. The association said with many private sector employees having defined contribution pensions, this can mean it is difficult to accurately predict pension income. As a result, some lenders are unsure of mortgage affordability into retirement. In addition, IMLA said the Mortgage Market Review wants lenders to ensure mortgages are affordable for the lifetime of the loan. Therefore, many lenders see lending into retirement as too risky. As such, many borrowers who do not purchase a home until their forties will see their options significantly reduced. Peter Williams, executive director of IMLA, said: “This issue goes beyond the transitional arrangements for existing borrowers and means that efforts by the lending community to follow the spirit of MMR with new customers are being hampered by the very real concern that it may be cited against them in future. “Uncertain pension incomes make it difficult for lenders to assess mortgage affordability in later life, and this may become even harder when the new pension freedoms take effect next year. To avoid a situation where regulation brings about the extinction of mortgage terms that stretch into retirement, we need clarity and confirmation about where the boundaries of responsible lending truly lie. “MMR has been a big step forward, but having put a strong framework in place for the future, attention must now focus on honing the template so the pendulum doesn‟t swing too far towards conservatism. Wherever possible, protecting consumers from themselves should not rule out options that would benefit them financially and meet an obvious need.”
  9. 9. Top News Stories The housing market is cooling, with fewer house purchase approvals. New figures from the British Bankers‟ Association show that approvals stood 16% lower in October than the same month in 2013. Despite this, annual unsecured borrowing growth is at 2.8%, which represents the highest rate since 2008. Richard Woolhouse, chief economist at the BBA, commented: “Despite a softening in the housing market, consumers continue to show confidence in the economy with unsecured borrowing at its highest growth rate in years. At the same time we all continue to make the most of new ISA rules, stashing more in our savings accounts over the course of the last year.” New York has overtaken London as the leading global financial centre. A survey by Kinetic Partners of financial professionals found 59% cited New York as the top financial hub, compared to 38% who stated London. Two years ago, almost two-thirds of respondents ranked London in the number one spot. Over half of respondents also said that in five years‟ time, Shanghai would be the leading emerging market centre. Nicola Sturgeon has become the leader of the Scottish National Party (SNP). In her post-election speech, the first minister said: “It will surprise no-one to hear that I will always argue the case for more powers - indeed, the full powers of independence - for this parliament.” She also paid tribute to Alex Salmond, who resigned in September after the electorate returned a No outcome following the vote for independence. At the time of resignation, Mr Salmond said: “I am immensely proud of the campaign which Yes Scotland fought and of the 1.6 million voters who rallied to that cause by backing an independent Scotland.” The new SNP leader thanked Mr Salmond for his support over the past 20 years. The UK‟s GDP for Q3 stood at 0.7%. The Office for National Statistics has released the second GDP estimate, which remains unchanged after last month‟s preliminary figures were published. Output experienced positive growth in all four of the main sectors, with construction and services seeing a 0.8% rise. Manufacturing grew at a slower pace at 0.4%.