By Daniel Hunter
Speaking at the Council of Mortgage Lenders' annual conference in London this week, CML Chairman Nigel Terrington, CEO of the Paragon Group, stressed the importance of a long-term vision and a joined-up strategy for the UK housing market.
He also conveyed the importance of the need for a planned exit strategy for the current Help to Buy scheme to stop any drift towards permanent intervention in the market.
Mr Terrington highlighted that a long-term vision was required to create a sustainable housing market which would be one:
"Where our customers have rational expectations of what their mortgage will deliver for them - which is a home - and not see housing debt as the long-term answer to all their financial needs. A market where intermediaries don't veer from over-exuberance to over-despair at the shift of an interest rate. A market where lenders have business plans which temper short-term profitability with long-term sustainability. Where regulators understand that some rules and restrictions impose cost without protection."
To achieve such a market would require a more co-ordinated approach, driven by Government, than has emerged to date. It also implies self-discipline within the industry itself. Mr Terrington said that the mortgage industry should recognise its own tendencies to excess - as well as those of many of its customers:
"At least some of the characteristics of the market have their roots in the way in which the British have pursued home-ownership over the years - with a vigour that has at times bordered on the obsessional. I believe this is an embedded characteristic that would be foolish for the industry to challenge - although it does place a responsibility on all of us involved to ensure that our products, our services and our practices do not magnify - but rather temper - those characteristics."
Looking ahead to the implementation of the Mortgage Market Review, and reflecting on the introduction of Help to Buy, the CML Chairman said that there were three important warning lights that need to be addressed for the scheme to be perceived as a success.
The first of these was to ensure that an exit strategy is planned and executed in good time. Mr Terrington observed that the scheme should be a time-limited intervention, not a permanent feature, saying:
"It's important that Help to Buy doesn't morph into the US scheme, Fannie Mae. I don't believe that it's the intention for the scheme to rumble on for decades to come. But I doubt if the American architects of Fannie and Freddie envisaged quite how long their scheme would last. We need tapering at the end of Help to Buy; not a cliff edge. This will not happen by chance and will require careful planning."
Secondly, said Mr Terrington, it was important to consider the flow of regulatory change, especially the Mortgage Market Review, and ensure that the scheme works alongside it. He pointed out that some applications will inevitably be rejected on the grounds of affordability or credit-worthiness, and said such rejections "must not become a political football".
And finally, the effects of the scheme will need careful scrutiny - but may not necessarily be easy to spot:
"We can be sure that they will vary greatly between regions of the UK - Northern Ireland for example would today regard the idea of an incipient housing bubble as fanciful; there will be time lags; there will be false positives; there will be statistical noise. Interpretation will require market input and the CML is well placed to make that contribution."
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