I remember when my voice first showed signs of breaking.
I was on stage, playing Joseph in ‘Joseph and the Amazing Technicolour Dreamcoat’. I was 11 and the gym hall was full of parents watching us kids. As I embarked on my BIG solo of Close Every Door To Me, it hit.
“For I know I shall fiiiiiiiiiiiiiiiiiiiiind”.
“Er, what the hell was that?” I asked myself. The big note warbled. I continued as every pro should, but remember looking around and seeing the sniggers. Some things just stick with you and that did me.
Puberty is something we all go through and it brings with it a rollercoaster of emotions. Excitement, frustration, anger, confusion – it’s life’s free ticket to the greatest ride on earth.
And now, I believe it has hit the mortgage industry.
We have seen the industry grow over the years. We have seen it through the teething of the ’90s (17% interest rates were as painful as incisors cutting through), watched the growth spurt (buy-to-let booms of the early noughties), and we all remember the “first steps of FSA regulation”.
Now, comes the mortgage industry’s steps into puberty.
It is a defining time. Puberty defines the person you become for the rest of your life and are the first signs of maturity.
Whilst these changes are difficult to cope with and sometimes more challenging than we perhaps ever thought they could be, we know, come the end of it, our character is defined and that puberty lays down the blueprint of what we will become.
This may seem a strange comparison to draw. We have seen a lot in the mortgage industry, but what we are now in are our defining moments.
Lenders are making some big changes to their criteria and these changes may recieve much criticism, but we need to look at the bigger picture. We need to look at why these changes are being implemented and we need to learn to cope with them as they will not be going away for a while.
Santander’s recent reduction of interest only to 50% LTV was, at first, a bit of a shock. The reality is, however, that we all knew this day would come. How this decision will influence other lenders remains to be seen, but Lloyds followed suit soon after, tightening its interest-only rules and we expect more to follow.
It is a big change from what we were used to – 95% interest only seems almost mythical now.
People coming into the industry must think “surely not?”. Surely, there was never such a product? Well there was 90% self cert interest-only deals.
It’s laughable now to even think that such things ever existed, but they did. Such products were like playtime at nursery. They were a pleasure, but let’s be honest, they simply cannot go on for the rest of your life.
We adapt to change in our every day life in our growth and we understand why such change is implemented: for the greater good.
After much reflection, perhaps a little bit of sulking, and then a complete reality check, it’s clear the criteria changes we are witnessing are all for the greater good of the economy.
With so many examples of irresponsible lending in the past, lenders are now asking the question “how will you repay the mortgage at the end of the term?” and we are up in arms at why they are asking.
I know we want to be treated like adults, but the economy is in a mess. We must all unite and find a route to recovery.
It could be argued that, with no huge increases in swap rates of late, the increase in interest rates we have seen since mid-December represents lenders looking to increase profits by increasing margins.
But, with everything going on in Greece right now and the threat of how that could impact Europe and ourselves, do any of us really want to borrow as much as the banks will lend us and show no signs of how we intend to repay that debt?
Who knows what is round the corner. Puberty brings with it mood swings. We accept that and these mood swings are often symbolic of lenders and their attitude to brokers/clients and the trust they place in us and our abilities to maintain the payments of the funds they are lending us.
We are all maturing in our concept of debt, because we have to and because we are seeing first hand the implications that it will have if we don’t.
We are not taking on as much as we used to and looking at repaying the debt again, rather than relying on property growth to do so for us.
Perhaps one of the most stupid things I have ever done as a growing teenager was swan dive into a collection of rubbish bags placed outside a pub. At the time, I was an adolescent, growing up without a care in the world and just having fun.
Looking back, my thoughts are “what if there were broken bottles of glass in there, what if someone had disposed of a sharp instrument that would have impaled me on impact?”. I had cleared a good 5 to 6ft of air whilst forming my swan dive (actually, it was pretty cool), so it could have been very messy.
The mortgage market has had these swan dive moments and now, with perhaps the benefit of hindsight, we can ensure such moments do not happen again.
Let’s embrace the puberty/maturity the industry is showing. I know it is not what we want, and hey none of us ever really want to grow up, but we have to.
The current climate is teaching us to understand debt again and to try and keep it a little bit more under control. Whilst we find our way to handling these times, think back to who you were when you were young, the decisions you made and how they shaped your life.
And remember that puberty, as tough as it was, was a necessity and has made you the unbelievable person you are today.
Growing up is hard, but it is worth it.
But is that some bin bags I can see? “WAHOOOOOOOOOOO…”
Lea Karasavvas is managing director of Prolific Mortgage Finance
