Speaking at the trade organisation’s annual lunch in London today, the CEO said that since the financial crisis, there had been an “understandable but inexorable shift towards risk minimisation and risk aversion”.
He referenced the low number of arrears and repossession rates, and said while this was not a bad thing, it raised questions as to whether this approach to lending had “crystallised a different risk” and locked people out of homeownership.
Postings said: “We have created a world where, in trying to help some people avoid problems when borrowing, we have given them a worse overall outcome. It is all about balance and the plan is an attempt to get the risk-protection pendulum at the optimum point.”
A new era for mortgage lending
Postings said he was “delighted” to see this addressed in the Financial Conduct Authority’s (FCA’s) five-year strategy, with some of UK Finance’s suggestions taken on board by the regulator.
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He also said he was pleased to see the government consider his previous concerns about the Financial Ombudsman Service (FOS) going “above and beyond both regulation and law” with a review of the service.
“All we want is a fair, consistent dispute resolution service and the government has listened and agreed,” he added.
Postings said UK Finance’s recommendations in its plan for growth affected the mortgage industry in “many other ways”, as this included the suggestion for the FCA to set up a joint industry working group to ensure Consumer Duty is “embedded in a way that complements the FCA’s secondary competitiveness and growth objective”.
He also said the FCA should take into account the impact of simplifying and streamlining its rules.
Further, Postings called for the reform of capital requirements on banks, “so that these better reflect the level of risk in the system to help boost lending to homebuyers”.
He said the regulators should remove the “cliff edges” in capital and leverage requirements, as they produced “artificial constraints” on balance sheet growth. Postings also said there needed to be an “urgent and enduring” solution to the treatment of credit losses in normal and stress scenarios to “reduce pro-cyclicality and support lending during difficult economic periods”.
UK Finance has also asked for collaboration with the industry on proposals to improve support for first- and last-time buyers to increase access to affordable credit, including those with non-standard credit profiles.
Further, Postings said the organisation wanted the FCA to take forward proposals to simplify responsible lending and advice rules, as well as consult on removing outdated guidance and overlapping standards.
He noted that the regulator was already making “real progress” with this.
Postings said UK Finance wanted to see lenders “fill the funding gap for decarbonising the UK’s homes” through property-linked finance and a free advisory service for homeowners.
The organisation also discussed the loan-to-income (LTI) flow limit and asked the Prudential Regulation Authority (PRA) to change the capital weighting of mortgages that use the Freedom to Buy guarantee scheme.
Postings said: “What this agenda demonstrates is how we have moved from pointing out the problems holding back growth, to working much more symbiotically with government and regulators and directly addressing the issues. It is a fundamental and major shift, and one I welcome wholeheartedly.
“We all have a desire to provide the finance for safe, secure, affordable homes that are more sustainable, and to allow families to feel that sense of security that homeownership brings. These changes need to also bring about greater inclusion in the financial system and will provide the springboard for economic growth.”
He added: “In these uncertain times, having a joined-up approach between industry, government and regulators, coupled with a slightly higher tolerance of risk, will boost confidence and allow us to take advantage of the opportunities that are available to the country economically.
“It is exhilarating to be at the centre of this debate on your behalf, and I should like to say a big thank you to our members for all their support and involvement in this complex but vital agenda.”
