In a speech at the UK Finance’s annual mortgage lunch today, David Postings, chief executive of UK Finance, said improved fire safety regulations had impacted the market for flats, with new stands and retrospection making people “extremely concerned about the value, saleability and mortgageability of their property”.
Postings added that it was important to “avoid the same thing” occurring as housing stock transitions to net zero.
He reiterated that UK Finance had advocated for tax changes and incentives to encourage the greening of housing stock to “help the most vulnerable to make the transition”.
“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.
“This approach could have the unintended consequence of either creating energy inefficient properties that are unmortgageable or penalising those homeowners who cannot make the change easily, through the imposition of higher interest rates or local eco-taxes,” he explained.
Postings said both would lead to the “creation of a new cohort of property prisoners”, which he said lenders did not wish to happen.
He urged lenders and the mortgage industry more widely 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,” Postings added.
Lack of clarity with Consumer Duty could lead to lender caution
Postings said Consumer Duty was a “well-meaning idea” as it prioritised good customer outcomes.
However, he said the industry should be “thoughtful” about its application, noting that the term “good” was not defined and “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 added.
He pointed to the choice between a fixed and a variable rate, and said a good outcome was very dependent on timing. He said that in September last year a fixed rate could have been seen as a “prudential hedge” but this could be very different six months later.
“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,” Postings explained.
He added that the “feeling of retrospection” was “most concerning” as people based their decisions on prevailing rules and regulations but these were increasingly changing. Examples include taxing income rather than profit for landlords or the green transition.
“Houses are significant investments for most of us and if people start to believe that they might be caught out later, that will have an impact on their wellbeing,” Postings said.
Lenders will contact over 20 million people in next year to offer financial support
Postings said with rising interest rates, falling house price predictions, large bills and large borrowing “it was inevitable that people feel less secure”.
He said it was “fortunate” so far the labour market had staid buoyant but any changes could further threaten confidence in housing.
Postings said lenders had been proactive in helping customers, making 16.5 million contacts in the past 12 months to highlight support available if they were financially struggling.
He added that it expected make 20.5 million contacts with borrowers in the next 12 months.
Postings noted that 3.9 million contacts had been made for customer coming to the end of fixed rate mortgages in the past 12 months and a further 4.4 million were predicted in the next 12 months.
He continued that around 200,000 customers had been offered tailored forbearance support over the same period and two million offers tools to manage their finances.
“We represent an industry that supports nine million families in the UK to own their own home and a further 200,000 buy-to-let landlords provide a home to their tenants.
“We help provide security and in times of strife we try really hard to ensure that security is protected and that mortgage customers can continue to live in their homes,” Postings said.
