UK Finance chief executive officer David Postings says the symbiotic relationship between borrower and lender is challenged more now than at any time in my career.
Speaking at the UK Finance Annual Mortgage Lunch Postings highlights that “well intentioned public policy” is one of those challenges.
He highlights the impact that improved fire safety regulations had on the market for flats.
While Postings states that no one would argue for lower standards, he says: “The swift imposition of new standards and retrospection meant that not only were people concerned for fire safety but extremely concerned about the value, saleability and mortgageability of their property. This impacts their overall feeling of security.”
However, he argues that the industry must work with policymakers “to avoid same thing happening at scale as we attempt to transition the housing stock to net zero”.
A UK Finance net zero homes report has highlighted the need for tax changes, and incentives to encourage greening of the housing stock and to help the most vulnerable to make the transition.
Postings comments: “I worry that the easy policy option – pushing lenders to go green at a pace that essentially just greens balance sheets and not the housing stock might prove hard to resist optically.”
Using this approach could have “the unintended consequence of either creating energy inefficient properties that are un-mortgageable or penalising those homeowners who cannot make the change easily, through the imposition of higher interest rates or local eco-taxes”.
However, Postings says both will result in the creation of a new cohort of property prisoners, something he suggests that as lenders “you would not wish to happen”.
“Consequently, we need to remain vigilant and stress the need to provide incentives that promote the feeling of security and inclusivity. The alternative undermines people’s confidence in housing.”
He also urges the industry to be “thoughtful” about the application of the new Consumer Duty.
“It is another well-meaning idea. Who could possibly argue that lenders shouldn’t have a duty to ensure a good outcome for their customers?”
“I discussed this with senior members of the clergy recently and I pointed out that the term ‘good’ is not defined and it is likely to be in the eye of the beholder at a point in time. For a product like a mortgage, that could be at any time during its life.”
Postings suggests that in the absence of clarity, lenders are likely to take “a cautious approach”.
“That will almost certainly result in fewer people being able to access mortgage products and it will impact people’s sense of security and ability to own their own home or improve the home they already have.”
However, Postings says it is the feeling of “retrospection that is most concerning in my view”.
“People make decisions based upon the prevailing rules and regulations. More and more we see these rules change.”
“At a time of rapidly rising interest rates people naturally become more cautious. We have seen some pretty gloomy house price predictions and they do nothing to improve people’s feeling of wellbeing.”
“If they are overlayed with potentially large bills, and probably larger borrowing to fund retrofitting it is inevitable that people feel less secure. We are fortunate that so far, the jobs market has remained pretty buoyant. If that changes then confidence in housing could be even more threatened.”
In the last 12 months, Postings reveals that the industry has made 16.5m contacts with borrowers to highlight the support available if they are facing financial difficulty and expect to make 20.5m in the next 12 months.
It has also made 3.9m contacts for customers coming to the end of fixed rate mortgages in the past year with a further 4.4m expected in the next 12 months.
In addition, just under 200,000 customers were provided with tailored mortgage forbearance over the same period, and two million provided with help in managing their finances including budgeting tools, access to debt advice and breathing space.
Postings calls on the industry to “push policy makers to understand their actions have a huge part to play in that essential need to have a secure home”.
He concludes: “We need to get them to think about their policy changes in the same way the PSB has been doing.”
“We, as an industry, have a big role to play in this debate and if we get it right, we will be coming together to celebrate home ownership and the security it brings for many decades to come.”
