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Duffy on Mortgages

Why am I telling you this? Well, I am afraid that this is the most relevant analogy I can make for the 2005 mortgage market.

We have all had a long stint at the bar. Since 2000, gross mortgage advances have risen from 120bn a year to 300bn last year. Developments in facets such as technology, non-conforming product design and a resilient BTL market have left many businesses sated. But as with the stockmarket over the past three years, I sense that not only have we already soft-landed but we are in something of a mediumterm divot.

Pretty sanguine, you might think, particularly with some alleged good news stories surfacing. For instance, prop-ertyfinder.com last week suggested that homebuyer confidence recovered slightly in December yet 66 per cent of their respondents still predicted prices to fall in 2005. Simultaneously, we heard about a Government thinktank being established to help first-time buyers via a five-year plan featuring a public and private sector partnership. Too little too late,I am afraid – that genie is already is already out of that bottle. Besides, does anybody really think that after Mervyn King’s skilful and orchestrated after-dinner remarks of 2004, he wants to see anything other than a controlled andmoribund market in 2005?Yes , it is true that the fundamentals such as high employment and low rates will underpin the market this year and I am certainly not envisaging a prices meltdown. What I am forecasting is up to three years of pretty static growth for the intermediary market. The bull run is truly over.

This now presents some real challenges for practitioners, not least how they continue to grow their businesses to the satisfaction of shareholders in an over-supplied market within which consumer confidence could be subdued for some time. The British are a nation of reactionaries. Whether it is sporting heroes or base rates, we always seem to live on the belief that what has gone up must come down.

Many of today’s business leaders have not managed in such an environment. Regulation coming at a time when monthly mortgage approvals are at their lowest levels for nearly 10 years means that countless businesses are over-weight, with non-fee earners , underperformers or both. My hunch is that many lenders and brokers are carrying between 5 per cent and 15 per cent more staff than they effectively need. In a fiercely competitive market, that is simply unsustainable.

The 100 job losses at Essential Mortgages in Wolverhampton is a harbinger of what is to come. In London, I know that both Hamptons and Savills are being inundated with CVs from recruitment agencies desperate to place brokers who themselves are minded to jump before they are pushed. Business development managers are also prominent in what is a January transfer window where sellers outnumber buyers.

I equally believe that many businesses have underestimated the indirect costs of regulation. The AMI has alerted us to the burdensome regulatory levies coming our way in April. But a lesser appreciated strand to this story is the distraction cost which N4 brought. Managing directors nowadays spend a disproportionate amount of their time trying to abide by MCOB as opposed to shaping and developing strategies to bolster revenues. Lenders are the same. We have all got very defensive.

Kevin Duffy is managing director at Hamptons International Mortgages

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