It is reminder to us all of the significance of the insurance industry’s work on the sharing of flood risk across the market. Access to affordable buildings insurance brings important benefits to the wider housing market.
Without such arrangements, access to, and cost of, insurance could become a much more significant element in the housing and mortgage transaction. For example, the current Flood Re proposals currently under discussion may not be likely to prove a complete solution, as buy-to-let properties, top-end properties and many leaseholds will not be covered by the proposed arrangements.
Of course in regulatory terms mortgage lenders are highly attuned to the differences between owner occupation and buy-to-let, but it should be remembered that these differences are deeper than the way in which the mortgages are sold and administered.
These regulatory differences will be highlighted again when the much delayed EU mortgage directive is finally signed-off and the process begins to implement the separate elements into the UK mortgage market. Turning EU-wide mortgage rules into UK regulation is a new challenge for the FCA and the industry.
These rules are written at a high level with aim in part of increasing standardisation across what are currently very different mortgage markets that vary widely in sophistication and in structure. Given that the FCA has had the opportunity through the MMR to make the changes it sees necessary to the market, it is hard to argue that the EU directive will do more than result, in the short-term at least, in additional cost and changes to the UK market, although over time EU-wide rules should bring benefits.
Returning to my theme of buy-to-let, which is largely a UK market, this will follow a different path through an industry-led statement of good practice.
This approach to buy-to-let is more about reflecting its differences as a market compared to owner-occupation, rather than in seeking a difference in core principles around the treatment of the customer (with the notable exception of advice about the buy-to-let mortgage, given that this is a commercial arrangement).
We all hope that wet weather will flow through to an early spring. In the meantime it is worth reflecting on the fact that whilst a mortgage is a mortgage, the underlying arrangements are often rather more varied.
Andrew Baddeley-Chappell is head of mortgage strategy and policy at Nationwide
