Some 40 years ago I worked for a business in London that – allegedly – planned around a seven-year cycle.
This cycle has always remained with me – either re-modelling and/or re-shaping the business or challenging how and why the business model will exist in a changing environment. The mortgage industry is no different to any other business model and whether you are a distributor, intermediary, borrower or lender, events will ensure that change is required.
Since establishing PMS in November 1996, we have created a different way of doing things. When the company was acquired some seven years after launch, the new owners had concerns as to how statutory regulation would impact on the business model. But these fears were unfounded, as from 2002-03 the mortgage industry geared itself up for the volume explosion that has in some ways created the issues and problems that exist today. With that in mind, over the last couple of years PMS has been changing its business, first its name and then by strengthening its protection and savings propositions. We realised that unless we could grow our business and maintain costs then further consolidation would impact – not just on the industry but also on us.
We recognised 18 months ago that this consolidation was the right way forward and provided we could secure a major established business partner, our viability would be ensured.
What will the market look like over the next five to seven years?
We already know that regulation, mortgage funding and risk-adverse lenders, coupled with the repayment of the £300bn of specialist lending monies, will impact on how we all do things in the future. With the first-time buyer and first-time seller situation likely to get worse before it gets better, is our love affair with home ownership about to wane in favour of renting for the first time in postwar Britain?
It is doubtful the new Government will make building homes and home ownership a priority on its agenda. Yes, abandoning home information packs in England and Wales helps potential vendors but any increase in capital gains tax on second properties will further harm parental deposits for first and second-time buyers.
If the rental sector does flourish we must be more adept and confident in selling the protection products to those customers. Having just completed a series of roadshows for both Sesame and PMS members around the country, protection companies such as LV, Bright Grey, Bupa and Fortis demonstrated they have been listening to our requirements and they do have products for us to sell and market to this growing group of customers.
As an industry we have to make these changes and not be so reliant on house purchases. If only the owners of the company I worked for 40 years ago had practiced what they preached with regards to the seven-year cycle, their business as a secondary lender would not have gone into administration in 1975.
John Malone is Executive Chairman at PMS