Warren Perry – head of research, Churchill Investments
Antony Badaloo – manager, Church Hill Finance
Paul White – consultant, Belgravia
How do you think the merger of Nationwide and Portman will affect intermediaries?Perry: I do not think it will have any impact on intermediaries. In a couple of instances, there may be savers who do extremely well from a windfall and hence should require some financial advice but generally the merger is not going to create millionaires. We may see some more savers looking for the next carpetbagging deal but these are now few and far between. It might reignite some savers’ interest in talking to IFAs though, which is no bad thing. Badaloo: This will help, as both are active in our market. We need a decent challenge to HBOS and Abbey. White: As the Portman may offer niche products in future while the Nationwide concentrates on a prime offering, we could now have lost the Portman’s prime products, which is a shame. When they decided to launch a competitive mortgage, it was usually very good indeed and I had no difficulty recommending it to my clients. If the Portman name is retained, they may need to reinvent themselves, to differentiate themselves from Nationwide’s other arm, UCB Homeloans.
Do you think we will see further consolidation in the lending market on a similar scale to Nationwide and Portman?Perry: Yes. Consolidation within the financial services sector has been a key theme globally for a decade now. The mutual status is slowly but surely coming to an end, as evidenced by this recent deal and Standard Lifes move over the summer. It is likely that smaller societies will be swallowed up and we may well see some moves within the banking sector as Lloyds has long be subject of takeover talk. This has the potential to reduce competition but not in the immediate future. Badaloo: We may well do. Lenders who want fast expansion do not have the time to grow organically. White: Any further consolidation among the traditional lenders has to be seen in the context of new entrants, such as Edeus, who demonstrate that there will always be room for efficient mortgage providers. Therefore the market does correct itself, if the bigger lenders stop doing what made them successful in the first place – providing a personal service. I imagine that the Nationwide/ Portman will merge again with another building society.
How much does the mortgage market have to fear from the emergence of claim-chasers?Perry: If, by claim-chasers, you mean organisations that advise people on how to claim compensation for missold mortgages and associated savings products, then the market has lots to fear from people like this. There is a perfectly good, regulated, compensation process in place which people should be encouraged to follow rather than lining the pockets of low life who claim to be helping when all they are doing is exploiting. Badaloo: Mortgage claim-chasers are going to wreak havoc if – more like when – the property market slows down and the losers start looking for someone to blame. We get the blame when things go wrong but do not share in the spoils, when they do well. Strange, that. White: Claim-chasers are trying to find new markets to exploit as the endowment saga draws to a close. Previous attempts to unearth another scandal, such as FSAVCs, did not make much headway, as comparatively few people had bought them. As borrowers usually sign the mortgage offer under the active or passive supervision of a solicitor, the scope for misbuying is dramatically reduced. Is the increasing trend towards securitisation from the big investment banks entering the market likely to stifle innovation as lenders build products to suit the eventual buyer? Perry: Surely, the important thing is that potential buyers have a range of products available to them which may suit their particular circumstances. Innovation within markets is all well and good and should be encouraged as long as the products being created have an end purpose. Securitisation is just another facet to the market which could increase competition and provide borrowers with another option but it has yet to have a major impact on the UK market. Badaloo: Securitisation is a good thing in a buoyant market, as it provides capacity. Niche players will always innovate, so there is room for everyone. White: No, innovation is the driver behind any market. Point-of-sale offers show that modern technology can automate prime cases, leaving more time for underwriters to consider less straightforward cases on their merits. Of course, not everybody lives their life as an underwriter expects, with people moving home within five-year periods and going on holiday before paying the credit card installment. They are not inherent bad risks and should be catered for.
What do you make of the fact that so many areas of the mortgage market are under FSA investigation at the moment, such as sub-prime, interest-only, self-cert, mortgages into retirement, lifetime mortgages? Is there a problem in the market?Perry: No, I do not think there is a problem in the market, it is more to do with the fact that, until recently, the market was unregulated. This was a ridiculous situation as the biggest financial decision of most people’s lives was unregulated but putting 10 in a bank account was regulated. The FSA is just playing catch-up, and rightly so, with an area of the market over which it had no control. Badaloo: The FSA needs things to investigate. A lot of business has been conducted in the mortgage arena over the last few years so I suppose this is natural. White: Like a former headmaster at one of my schools, the FSA works on a purge basis, where they concentrate (too much) on one particular area. Like New Labour, what the press comments on today, the FSA has to be seen to act on tomorrow. The fact that the press and the FSA are focusing on mortgages is purely a reflection that many people own them, so having a wider interest among readers and regulators.
Do you expect other lenders to follow GMAC and Edeus in offering point-of-sale offers and how significant is this for the market?Perry: Hugely significant. Anything that speeds up the whole housebuying process, one of the most stressful times of an individual’s life, has to be encouraged. Modern technology exists for documents to be sent more rapidly and for online completion of the required paperwork. The stumbling block still remains the human element. However, on such a major decision, perhaps people should be given a little more time to consider their actions. Badaloo: I foresee many more Pos facilities as the concept beds down, and any problems are ironed out. The Land Registry computerisation will help a great deal but traditional methods will be here for the long haul. White: Yes, it will become standard. Its significance is that competitors will be forced to follow suit in order to maintain market share. For example, once fighter pilots were supplied with oxygen to allow them to fly higher, the opposing side had to copy them to avoid being shot of the sky by a more agile opponent. Therefore it became standard equipment for all. Flyers of Sopwith Camels beware!