Since M-Day, we have experienced record gross lending in 2004, 2006 and 2007, seen a huge increase and decline in the number of lenders and products, passed the £1trn mark in total mortgage borrowing, seen purchase transactions fall well below long-term trends, experienced the lowest ever repossessions in 2004 and seen a significant reduction in mortgage distributors from more than 80 at M-Day to just 23 today.
But are these soaring peaks and plunging troughs significant or have our media so sensationalised the current climate that we are not only in danger of talking ourselves into a recession but of igniting fears of a modern-day depression?
The heightened tension in the market certainly adds to the extreme feel of the day-to-day job. Professional mortgage brokers face cut-throat competition, not only from high-street and online competitors but also from the have-a-go lenders which will sacrifice the broker to poach the client.
They risk their time, energy and reputation in pursuing mortgage applications, only for the property to be downvalued and the application to flounder at the survey stage. Don’t forget the monthly adrenalin rush as they consider the ramifications of monetary policy committee announcements on the rise and fall of interest rates.
Former US President Bill Clinton coined the phrase: ”It’s the economy, stupid”, meaning that once the economy is working well, everything else will fall into place. I am sure many readers will support this view but in truth, I bet few of us could name even five measures in Chancellor Alistair Darling’s first Budget designed to reverse the credit crunch, let alone quash any hint of a recession.
The danger is of sitting back and waiting for the economy to get fixed. In this way, you have already bought into the idea that there is a recession. Such thinking is a slippery slope. If you believe there will be trouble ahead, you will change your behaviour to respond to these imaginary problems, then it will not be too long before you change your behaviour to become the architect of your own recession. We do need to be careful what we wish for. I am sure we have all heard the story of the hypochondriac’s gravestone that reads: “I told you I was ill.”
Our market is founded on confidence and trust. Perception is key. Who decides that a property is worth £1m or £500,000 when the insurance rebuilding costs demonstrate perfectly the true value of that pile of bricks?
After a prolonged period of the highest highs and lowest lows, a market correction was long overdue but a correction does not mean a recession, neither does it guarantee a return to record lending levels.
The Bank of England’s figures show that in May, 42,000 individuals received funds for a property investment. This might be lower than in previous months but it demonstrates that there is still business out there.
In times of uncertainty and of weakened consumer confidence, people look for certainty. They want experts with great reputations – a safe pair of hands. All you need to do is make sure that you can meet this demand.
Gerry O’Brien is managing director at Home of Choice