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This week in Mortgages

The Council of Mortgage Lender’s credibility as a trade body took a major blow this week after its sensational admission that it is not an informed commentator on the sub-prime and non-conforming market.

The damning indictment of its shortcomings is made all the worse when you consider the plethora of news regarding the growth of those sectors. With new firms entering the market almost weekly from home and abroad, it makes it imperative that a trade body representing 98 per cent of mortgage lenders understands that sector so it can act on behalf of its members.

What must all those lenders that pay their fees to the CML be thinking?
It’s like the Football Association saying it knows nothing about football or the Government saying it knows nothing about the governing. Well, maybe those are not the two best examples based on recent performance, but you get the point.

Unfortunately for the CML, it never meant those comments to be made public, but in having its dirty linen hung out to dry in public by Money Marketing, at least it may get its house in order at a speedier rate than first anticipated so it can represent its members effectively and help drive constructive debate in the market.

It says the major problem is a lack of data on the sectors, which should get all the consultancy and statistical firms clamouring for business.

That revelation may throw into doubt the second of three big pieces of news leaked from the CML this week, that it is predicting repossessions will rise by 46 per cent this year because of the growth in the
sub-prime sector.

However, given sub-prime lenders are more likely to come down hard on defaulters, and because sub-prime borrowers are by their nature more likely to get into trouble with repayments – two points the CML acknowledges – its revised figure of 15,000 repossessions in 2006, up from a forecast of 12,000 in February, seems credible on the surface.

It begs the question of whether consumers are being taken advantage by some lenders who get them into debt and then take their house, without adequate checks into their suitability for a product. The FSA will be watching closely, no doubt.

The third bit of news to quietly sneak its way out of CML Towers this week is the revelation that the mortgage industry influenced the FSA’s recent announcements into its probes into the equity release market and on exit fees. While the figures could not have been altered for obvious reasons, the industry managed to alter the tone of the announcements to put a more positive light on them.

As Which? points out, this begs the question of whether consumers are being given the full picture, and of whether the FSA has any faith in its own ability to interpret its results.

Finally, on the subject of equity release, this week saw two announcements of new initiatives to encourage more advisers into the market and to train those that are inadequately prepared to sell equity release business. Key Retirement Solutions and the Equity Release Advisory Service have both launched separate propositions and the market can only hope that brokers take advantage of these opportunities so there will be no more need for the kind of FSA investigations into the market we have seen recently.


This week in Regulation

Although the two free case rule protects the vast majority of advisers from ever having to pay a case fee to the FOS, the mere prospect of paying to prove their innocence has always stuck in advisers’ throats.

Product matters

We are seeing an abundance of structured contracts, which is no surprise, given the uncertainty of markets and a rising interest rate environment. I firmly believe these arrangements are not investments but simply products for the customer who does not understand risk. Despite the fact that the UK investor loses out on the advantage of […]

Tiner expected to renew FSA contract

FSA chief executive John Tiner’s three-year contract runs out next month but he is expected to stay for a second three-year term. All directors of the FSA are appointed on three-year contracts except the chairman Callum McCarthy whose term is five years.

Abe and Modi

India: Modi, reform and the oil price fall

Nearly 12 months since sweeping to power, prime minister Narendra Modi has overseen a significant turnaround in India, which is now on track to become one of the most pro-growth, pro-investment economies in Asia. While the market has rallied 48 per cent over the last year in response to Modi’s reform agenda, what is the potential for further progress?


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