Bien: Any regulation that weeds out rogue landlords is welcome but it is not clear how a register of private landlords will do this. Listing each landlord’s rental properties is of no benefit to landlord or tenant, nor will it stop the rogue element that ignores existing rules, such as joining the Tenancy Deposit Scheme or the provision of gas safety certificates, for example.
If membership of the register is not enforceable, the rogue element is unlikely to sign up anyway. Plenty of regulation has been introduced to the sector recently and needs to bed down before more is introduced or there is a danger this will only damage the private rented sector rather than encourage landlords to obey the rules.
Wright: Any new regulation needs to have clear objectives by which any proposed regulatory measures can be contrasted. They should not, as the National Landlords Association chairman says, be “intrusive”. In principle, I would not be against a register of private landlords but it must be able to demonstrate that all included data is completely relevant.
The immediate future for the private rental sector is in a precarious position, with concerns over landlord mortgage arrears and potential repossessions combined with a lack of new lettings on the market so the motivations and implementation of such a register would need to be handled carefully if full compliance is to be embraced.
Fitzgerald: The Rugg report on UK rental properties has been warmly received and the Government has launched a consultation on the way forward.
A central register of landlords has been suggested in order to monitor landlords and to ensure that standards of housing, including safety standards are driven higher.
There are 2.5 million properties in the rental sector and 50 per cent of these fail to meet basic standards. The Government must act to improve living standards in this sector but they must be careful not to alienate landlords with excessive regulation as this would cause a shortage of rental properties in the short-term.
Do you think the Council of Mortgage Lenders’ attack on small mortgage brokers at the FSA’s mortgage conference recently was justified?
Bien: No, it was not justified. The vast majority of small mortgage brokers do an excellent job and play a valuable role in giving advice. The CML should be acknowledging their valuable contribution and supporting them rather than blaming them for acting like “salesmen” more interested in cashflow than advisers protecting customers’ interests.
There are undoubtedly some intermediaries who deserve blame but not the vast majority.
Wright: Whether the CML in its infinite wisdom likes it or not, small mortgage brokers are an integral and trusted mortgage distribution channel.
Generally, having closer working relationships with their clients, they can typically demonstrate a higher level of understanding of their clients’ needs than the high-volume, sales- target-driven operators lining the high street.
It is arguable that the higher the volume, the greater diffi- culty there is in maintaining standards and quality control. So, as with the industry at large, it is rarely the small-volume distributors that are the cause of the greater and systemic ills.
Fitzgerald: The recent CML statement on small brokers was unjustified and short-sighted. Many parts of the report were balanced but I do not agree with Michael Coogan’s view that small brokers gave bad advice and were not acting in clients’ best interests.
This recession, which has caused unemployment and repossessions, was caused by greedy and dubious bankers and traders who fuelled the drive for profits by buying toxic debts from overseas. More regulation and increased costs will drive small brokers to extinction and this will decrease the choice for consumers and drive customers back to the banks.
What impact would the scrapping of proc fees as floated by the FSA recently have on the mortgage market? Would you be in favour of a move to adviser charging?
Bien: Choice is important and if procuration fees were removed, the only people able to get mortgage advice would be those able to afford to pay for it. This would be a dangerous move from a consumer perspective as people need advice; problems tend to occur when advice is not taken. If all proc fees are removed, it will be difficult to provide a decent advisory service for those likely to be most in need of it.
Wright: Any mortgage intermediary whose services are truly valued by their clients should have no fear of the removal of proc fees. This proposal could have the consequence of dividing the service offered in two, thus clearly distinguishing the advice service and processing service.
The expertise lies in the advice and this is what costs the most. The processing is essentially administration work and while this still requires a good understanding of the industry, it should cost less and therefore be charged accordingly.
Fitzgerald: The idea of scrapping procuration fees and advisers getting their remuneration from fees is something that will only harm the mortgage industry. This will not enhance the advice given by advisers and most clients will be reluctant to paying a fee for a straightforward mortgage.
This would only drive clients back to the high-street lenders for limited mortgage advice and I cannot see that it is right to charge first-time buyers a fee to arrange a mortgage. Surely an experienced independent mortgage adviser who is paid by the lender is offering a much better service to the clients.
FSA managing director of retail markets Jon Pain has said the regulator will look to prevent distressed mortgage books from being sold to unregulated firms. Are you in favour of this proposal and what impact would it have on the market if such a proposal did come into force?
Bien: Yes, I think this proposal makes a lot of sense. We are very happy for any mortgage-related transaction to be regulated, particularly as in this instance the interests of the consumer need to be protected. It would make this market more transparent and aid consumer protection, which has to be a good thing.
Wright: With hindsight, we are all experts but nonetheless it is hard to understand why this type of action has not been taken sooner so I am definitely in favour. It is stating the obvious to say that the whole aspect of buying and selling bundled deals needs far greater scrutiny and this measure would be just a way of raising standards.
Fitzgerald: The FSA is right to look very carefully at the sale of distressed mortgage books. The sale of them is a useful tool of funding for lenders who are wholesale funded and need to manage their arrears.
This form of securitisation has been of great benefit to lenders but it is only right that lenders do not use this method to take on higher levels of risk. This subject is being hotly debated in Europe and it will be interesting to see how the FSA reacts. It must be stressed that there is a very real danger of reduced funding ability and that could be very damaging.
Do you think the Government has done enough to support homeowners and first-time buyers in the current environment? Is there any evidence that homeowner schemes are working?
Bien: Market conditions are difficult and steps are required to help those in danger of losing their home or struggling to get into the market in the first instance.
The Homeowners Mortgage Support Scheme is a step in the right direction, helping those threatened by repossession stay in their homes but it is a shame that membership is not compulsory, so many borrowers will not be covered.
More could also be done to help first-time buyers. The popular MyChoiceHomeBuy scheme has already run out of funding, even though the year’s allocation was made in April, so potential buyers are being disappointed. There is huge demand but more money needs to be available.
Wright: We have seen little or no support for homeowners or first-time buyers or evidence that homeowner schemes are working although this may be due to the sector in which we operate and the type of business we attract.
We believe more support is needed in terms of higher lending levels, within reason, which lenders are not offering at present without disproportionately high costs.
Fitzgerald: The Government has done little to support homebuyers and the various first-time buyer schemes have been a disaster. The Government keeps on repeating that they are going to build more affordable housing and nothing really changes.
I feel that tax relief should be reintroduced to help first-time buyers and a complete overall of the stamp duty rules should be considered.
Stamp duty relief was raised until the end of the year to £175,000. I feel that stamp duty should start at a much higher level and the duty should be graduated. The current system is unjust and should be amended immediately.