The introduction of the Mortgage Market Review of course comes following a period when the mortgage market, particularly for first-time buyers, has been at its most accessible for a number of years.
Some might even suggest that the MMR is introducing measures which do not chime with the government’s own work in supporting the UK’s housing and mortgage market.
The Help to Buy scheme has been a catalyst for a great improvement in the number of high LTV mortgage products available not just for those lenders actively participating in the scheme but from others, mainly building societies.
All these measures show that the greater provision of higher LTV mortgages is having a noticeable impact on the ability of first-timers to buy a property and ordinarily one might expect this trend to continue into 2014 and beyond. However, at this point we must return to the MMR and the anticipated drop-off in lenders’ appetite to lend as they seek to acclimatise to the new rules and ensure their systems and processes are compliant.
Stepping back from the lending market can be done in a variety of ways and one is to make your products less competitive. Last week we saw two lenders, Santander and NatWest for Intermediaries, up the rates on their Help to Buy 2 products and one wonders how soon it will be before others follow suit?
This has put the spotlight back not just on Help to Buy pricing but the ongoing sustainability of high LTV loans and also those other lenders.
There’s no doubting that the high LTV mortgage market has benefited and developed greatly over the past 12 months. The big question is whether lenders will be willing to maintain their appetite to lend in the face of these regulatory changes?
It seems like lending levels (at least short-term) are going to be cut but will it be the first-timers and those in need of low-deposit/equity mortgage deals who will suffer the most? This part of the market has recovered well and we should all work towards ensuring that any blip in lending activity is temporary rather than being a long-term part of the ‘new normal’.
Simon Crone is president of commercial mortgage insurance at Genworth
