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The mortgage market and social engineering

Ben Thompson

Why the sudden political interest in the FSA’s mortgage market review? The various FSA papers relating to the MMR have been out for almost 18 months and have covered a wide range of issues and challenges. The theory is that, once implemented, we will have a healthy and competitive mortgage market and consumers will feel good about what is available to them and the quality of advice they receive.

We all know that is the intent but much is coming out of these papers that has caused concern to those in the industry. More recently, the housing minister and even the prime minister have weighed in with comments. Why are they interested?

The simple fact is that the penny has now dropped and the man on the street is reporting negative experiences to MPs regarding homebuying or even simple remortgaging experiences.

David Cameron said recently that reducing the deficit is something he has to do but launching the big society is something he wants to do. Well, what might the implementation of MMR do for politics, the community, the economy and, of course, the big society?

I do not have enough space to answer that properly but consider this:

  • What if the average age of a first-time buyer with no access to the bank of mum and dad jumped to 40-plus?
  • What if children had to stay with mum and dad until they were 30-plus, in some instances having spent three years living independently at university?
  • What would raising 2.3 kids feel like moving from one rented home to another?
  • How could a parent achieve their schooling ambitions on that basis?
  • How secure would children feel if they were not raised in a stable home?
  • How would families feel being raised in accommodation too small for their needs?
  • What would a mortgage underclass do to society in terms of rich versus poor?

Recent quotes say that one million would-be FTBs are being excluded from the market. The Council of Mortgage Lenders’ work with Policis shows 19 per cent are unable to move or remortgage and another 31 per cent are able to borrow but at levels markedly less than those required.

Some would say the industry has already righted itself after over-enthusiastic lending in the past. That argument leads to the view that it is not – and cannot be – the MMR that has done this because we are merely at the consulting stage, so it must be lack of funding.

Through whatever lens you look at it, things are changing. They are changing at such a rapid pace that many are already feeling the negatives highlighted above and that is not good.

I am delighted that Grant Shapps and David Cameron are getting to grips with this because, through a combination of factors – regulation, funding, lack of competition and so on – we are seeing the start of some serious social engineering. Have we voted for a society that in the future might have to face some or all of the above? I do not remember doing this.

Ben Thompson is director of mortgages at Legal & General

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