What the FSA was hoping, was that this could be achieved with as little side-effects as possible, especially given the state of the housing market in general at present.

The good news is that this morning the FSA have every right to have a smile on their faces after producing a thorough, though no doubt provocative, piece of work which achieves a great deal of its original aim. What is most pleasing, is that there is evidence that the FSA have held a genuine consultation period, taken much in, listened and ignored where both was necessary.

Of course there will be those that say these rules have either gone too far or not gone far enough, but on the whole it would be perhaps a little unfair for us to sit here and pontificate on the “could have should have” debate.

In essence, the whole underlying premise can be broken down into three key words; affordability, advice and realism.

At its’ core are 3 main principles for “good mortgage underwriting” :-

1. Mortgages and loans should only be advanced where there is a reasonable expectation that the customer can repay without relying on uncertain future house price rises. Lenders should assess affordability;
2. This affordability assessment should allow for the possibility that interest rates might rise in future
3. Interest-only mortgages should be assessed on a repayment basis unless there is a believable strategy for repaying out of capital resources that does not rely on the assumption that house prices will rise.

Let’s face it, it is pretty hard to argue with any of those as a basic starting point. What is important however, is how they are interpreted and whether there are strict rules on each.

At first glance, and let’s be honest although I had an advanced copy I have not read all 438 pages, this is quite a balanced blend of prescriptive rules and general guidelines that leave some flexibility for both lenders and consumers.

The first key point is around income and affordability; and here it is prescriptive “Income will have to be verified in every mortgage application”.

This means an end to self-certification, which although this has disappeared anyway, the lid is being well and truly bolted shut to prevent a return. It also means potentially an end to fast-track lending, where whilst mortgage advisers needed to have evidence of income on their file ready to present to the lender at a moment’s notice, lenders only checked a sample.

Whether lenders will still find a way to do this now they are ultimately responsible remains to be seen, but I for one will not shed a tear for the end of fast-track in its entirety. All of this is sensible and will help to combat worrying levels of fraud.

Before you start to shout about the self-employed, for whom self-certification was initially designed for before it became so miss-used, again refreshingly the FSA have recognised this. There are no “prescriptive requirements for self-employed customers” and therefore lenders do retain a level of discretion over how they underwrite in this sector. As the report says, ” Our aim is to ensure that lenders take an informed lending risk based on the evidence – not disregard the risk altogether.”

Also, affordability will need to be calculated on a capital repayment basis, again something that many lenders do now anyway. Recognising that interest only is a “niche product”, which is suitable for some, gone are proposals to outlaw interest only mortgages altogether.

Instead “interest only mortgages can still be offered as long as borrowers have a credible plan to repay the capital, but relying on hopes of rising property values is not enough”.

So whilst lenders retain some discretion over how they calculate affordability, they must be robust and must also take into account possible future interest rate rises. In other words, if you can barely afford the mortgage at today’s historically low tracker rates, and / or on an interest only basis, well, you won’t qualify for a loan in the future.

This is of course entirely sensible and is something that any mortgage adviser worth their salt has been doing anyway for many years. Which leads on nicely to one of the other most important parts, advice.

The FSA have recognised that proper advice should be the cornerstone of any mortgage proposal and that there is a large degree of confusion from the general public over whether they are receiving advice or not. It has always seemed crazy that in this day and age, especially after the events of the last few years, a 1st Time Buyer with no experience can walk into a bank branch and obtain a 90% LTV mortgage with no advice!

Therefore the FSA propose to remove the non-advised sales process, “requiring all sales which involve spoken or other interactive dialogue with the consumer to be advised“.

This is a brave and necessary step taken by the FSA which not only levels the playing field between Mortgage Advisers and direct lenders, but will improve the prospects for all consumers taking out the largest loan they are likely to obtain in their life.

There are opt-outs for those to proceed on an execution only basis for professional or High-Net Worth consumers, although I have seen a good many mortgage advisers who need advice just as much as the next guy!

This means that a purely online basis where no conversation is had can proceed without any advice.

The FSA has also gone further in identifying vulnerable consumers, such as those consolidating debt, who will not be allowed to opt-out and must always take advice. This is stunningly simple common-sense and the FSA should be applauded for this.

In order to improve client understanding, there are simplifications to the Initial Disclosure Document, changes to Key Fact Illustration trigger points to avoid information overload and the requirement of “firms to give the consumer a plain and simple explanation of whether there are any limitations in the product range they provide.”

There has also been some recognition to those Mortgage Prisoners who can still prove they can afford the loan but need to move and may be in negative equity, for example. Lenders are given some discretion over these rules for existing customers with a good track record in order to keep the market somewhat liquid and allow for some much needed job transiency.

These “Transitional Arrangements” only come into play where there is no additional borrowing and the monthly payment will be the same or less than the existing payments.

Obviously the devil is always in the detail and I am sure there are other points of interest, especially where niche products such as Bridging loans are concerned, which will be highlighted in due course.

However, as the arguments begin until this consultation phase ends on March 30th 2012, it seems that whilst this may not be the ultimate panacea to please everyone, it is a sensible, practical and courageous offering which will do much to ensure the illness does not become an epidemic again, whilst it should also avoid critically harming the patient.

This rise in rates I am alluding to is due to two things; firstly, as the storm in the Eurozone does its best to turn itself into a full scale hurricane of a banking crisis, because quite simply the cost of funds looks set to rise and secondly, liquidity issues are once more emerging from the shadows.

Given that almost every report seems to suggest we are heading, if not towards another full-scale recession, but a period of stagnation that feels like a recession anyway, it will come as no surprise that the MPC has decided to print more money, entering into another period of Quantitative Easing, (QE) a month earlier than initially expected. Another £75 billion, slightly more than thought, will be pumped into the system.

On the back of the US’s “Operation Twist”, which in essence involves the Fed selling short-term bonds and, here’s the twist, replacing them with longer term ones, (the result being that as more long-term bonds are purchased interest rates should fall), there was pressure on the Bank of England to do their bit.

As for the Euro issues turning into a banking crisis, we have already seen the first casualty in the shape of the Belgian / French bank Dexia which is about to enter into a Northern Rock style arrangement. Although the Europeans have talked positively about supporting their banks and of course Greece, it seems the markets do not quite believe them and need to see a concrete plan of action.

All this means there is a very high probability that, whilst the UK banks are undoubtedly in a much better position that our Euro counterparts, lending levels will be affected in the coming months. Almost every lender I have spoken to has said the same; unless things change they expect funding costs to rise and therefore mortgage rates on offer will rise accordingly.

With all of this mind and whilst we are experiencing some of the lowest rates for a generation, it does seem that the time to act is now. For those looking to remortgage there are now many products that are available at less than even the lowest Standard Variable Rate and some highly competitive fixed rates.

Tracker products start at 1.98% for 2 years, (the overall cost for comparison is 4.60% APR) and fixes now start at just 1.99%, (the overall cost for comparison is 5.30% APR), which is the lowest 2 years fix anyone can remember, a fantastic 2.69% (the overall cost for comparison is 3.40% APR) for 3 years and 5 year fixes available at an astonishing 3.29% (the overall cost for comparison is 4.90% APR).

Remember most offers are valid for 3 to 6 months, so if Chancellor Merkel et al do get their act together and rates improve again there will still be options.

The news headlines are screaming from this morning papers that all is not well, traders are pictured with head-in-hands alongside graphs dropping off a cliff and Mr Peston is everywhere again – sounds like a preview of Credit Crunch 2 – Revenge of the Markets?

Looking back at the blog postings that were written during the heady days of the 1st crises there are many similarities. Back then the speculation went from bank to bank until the pressure became too much and one by one banks were rescued. There was then a brief lull, some began to believe we were out of the woods and then there was Lehman’s.

The question is are we now seeing the same in the Eurozone? Speculation has heaped enormous pressures on the “outlying” Euro countries and one by one they have been bailed out, but this cannot go on indefinitely. So which country will emerge as the Lehman’s’ of this crises?

The European Central Bank seems to be spinning round in ever decreasing circles, last month raising interest rates and this month buying bonds, or rather saying it is buying bonds, but rumours abound that they are not showing their faith in the crucial countries of Italy & Spain. As the interest rates of those nations bonds edge towards the 7% level, the need for a bailout of almost unfathomable proportions draws nearer.

As each country totters closer to the edge so the financial pressure intensifies on the big two, France and Germany, and it seems their citizens are not prepared to finance their European partners indefinitely.

What they are seeing are other nations accepting their dosh whilst the politicians struggle to push through the reforms needed to ease the pressure, through a combination of public backlash, political infighting and just plain incompetence.

The very future of the Euro is on a knife-edge and swaying in a Force 9 gale.

But there is perhaps a more serious issue from across the pond. The USA is struggling and is on the brink of dropping back into a recession that threatens to drag the rest of the world with it. Again, party politics is playing its part with a group of extremists known as the Tea Party wreaking havoc.

If the US proves to be the Lehman’s’ , well, things will get tough for a while!

You could say that all of this is the markets revenge. Revenge for not being allowed to run its natural course and wreak even more havoc, stemmed by bailouts, handouts and the printing of lots of money.

As the irrepressible Robert Peston writes in his blog, “The overall volume of indebtedness in the economy is … still with us – although it has been shuffled from financial sector to public sector. And if you took the view four years ago that the quantum of debt in the system was unsustainably large, then you would argue that by propping up the banks, the day of reckoning was being postponed, not cancelled.”

As an excellent Newsnight debate last night all agreed, “the problem is the politics”. They have to get involved, they have to do something, but their very actions have a resultant effect.

So whilst many fear a credit crunch emerging out of Southern Europe the issue is whether this spreads across the globe once more. Whether or not we dip into recession again is hardly the main issue as for the average person it feels like we have never come out of it, but if banks do start to clam up again, more so than now, it will hurt.

The big difference this time is that Libor rates have barely moved. This is a good sign, as a rise in Libor can be seen as a key indication that something is very wrong.

So whilst it is not time to panic just yet, it is time for politicians’ to stop the “politics” – a big ask I know.

Meanwhile property prices in the UK continue to strengthen according to today’s report by Halifax, with bricks and mortar looking to be a somewhat safe haven in the current storm. Although banking shares are being battered once more, UK lenders still seem keen to lend and whilst mortgage rates are at an all time low, well, you can draw your own conclusions.

Now, where’s that Gordon Brown when you need him?

Of course there have been many detractors, the piss-takers and technologically inept who continue to see social media as a waste of time.

But with anything new and different, as Philosopher Arthur Schopenhauer said, “All truth passes through 3 stages : First it is ridiculed, Second it is violently opposed, Third, it is accepted as being self-evident …”

Those who do not embrace social media as a way of communicating to and learning from the very clients you aim to attract, risk being left behind in the future.

Not only has it helped us with our PR, but it has also given us some enquiries and a fully signed up introducer.

Leaving the B to C part aside for a moment, it is really the B to B side which I have really been blown away by. The number of times that people within the property industry as a whole, not just mortgage brokers, but lenders, solicitors, estate agents, journalists and property investors engage with comments you have made and before you know it you are part of a wider conversation with many interesting people you would maybe otherwise not have met.

It was during one such “conversation” that we picked up an Estate Agency introducer who has since passed us more than a dozen leads and during another, admittedly a very late night one, that the idea of the TweetMeet was developed by myself and Lea Karasavvas.

At its simplest, we just thought we had been conversing with many people we had never met and we should put that right over a few drinks. However, after a while it began to take on a deeper significance and the idea of trying to unify brokers, lenders, solicitors, surveyors and agents became a more far-reaching purpose.

After the pressures that our industry has faced over the past few years, and continues to face, it is important that everyone connected to the industry, from those at the coal face to those running businesses, come together to discuss these issues openly and honestly.

So far there seem to be around 100 people signed up and it would be great if there were many more. With the kind sponsorship of Tiuta to help things along I hope it will be an enjoyable event.

As with anything like this, there are some simple rules:-

1. The first rule of the TweetMeet is that you must talk about the tweetmeet!
2. Please make an effort to chat to everyone there, at the very least to introduce yourself, no cliques!
3. The event is Charterhouse Rules, so anything you say cannot be directly reported as having been said by you without your absolute agreement, which should help promote free discussion.
4. Enjoy, drink and network, but please no direct selling or poaching/recruiting on the night.
5. Feedback so we can improve the event for next time.

The event is totally informal, no long speeches or seminars, so feel free to wear what you like, relax and enjoy.

As my mate Lea Karasavvas stated: “This gives us an opportunity to remind each other we are all striving for economic recovery and that by working together, and not against each other, we can ensure it happens. It’s a chance for an industry brainstorm, done in a social environment, between influential business categories within the mortgage industry and will hopefully encourage extremely positive working relationships that will benefit us all.”

The event takes place in London on Thursday 23^rd June 2011 from 7pm at The Alchemist, 133 Houndsditch, London. The evening is planned to be an informal networking event, under Chatham House rules.

However, before we all get carried away on a sentimental journey let’s be honest, it was always going to happen, probably before the ink was even dry on the Lloyds / HBOS deal.

Of course my thoughts are with those who have lost their jobs after a tortuous period of uncertainty and I hope they all find something soon, but let’s not get too carried away with casting LBG as the pariah many of those leaving comments on websites seem to be doing.

If any of us were in charge of LBG from a pure business perspective the first decision to look at is the brand one. How many brands does one institution actually need? Where are the crossovers and where can we increase efficiency and make further savings?

Of course another brand missing effects consumer choice, but where all these brands are ultimately owned by one institution this is not as marked as it may once have been. Much depends on whether some of the underwriting “quirks” are merged into the remaining brands, more likely Halifax.

Actually there may be a business upside for brokers as more business with Halifax means potentially more opportunity to be paid on product transfers in a couple of year’s time!

Then there is the whole LBG hate brokers’ debate and the question of dual pricing. Whilst we should, as good brokers, continue to support excellent lenders such as Woolwich, Coventry and Nationwide who have in effect put their money where their mouths were as far as intermediaries are concerned, we all know the issues that LBG had and the problems of trying to keep those in branch from twiddling their fingers and, in any case, that was the last regime.

Since Antonio Horta-Osorio took over there has been a marked change in the intermediary sales staff both in terms of their optimistic outlook and engagement. This is not, or does not seem to be, a Chief Executive who is anti-intermediaries, in fact far from it. It is early days, but I believe the right man is now in charge and for brokers this will be a positive, which in turn will benefit the general public as they will be able to obtain the advice they need rather than being forced into a potentially non-advised branch network.

Choice and competition will increase again, as it slowly seems to be doing and we all want Halifax, BM etc back to their fighting weight.

In fact, there is actually one comment I read that really stands out and should give us all a little bit of sensitivity before we go around bemoaning the state of the world – “As a Lloyds Banking group employee who is affected by the announcement, it is really disappointing that all the intermediaries think of is themselves. I really don’t know why I’m shocked by this!!!”

As intermediaries we need to work hard to change our perception in both the eyes of the lenders and the public. We do not have a divine right to have all the best products and get paid inflated fees as we did pre-credit crunch. What we do demand, however, is that everyone who takes out a mortgage has access to proper advice and that lenders treat us with respect.

Respect, however, is a two way thing. Whilst we may not like or agree with decisions made, a little empathy and engagement is always preferable to throwing a strop and claiming “it’s my ball and I’m going home”.

In any case, today we should not be sorry for ourselves, but the hundreds who will lose their jobs and the passing of a great brand.

However, this week sees the release of a major report involving the “stress-testing” on a range of European Banks to determine their health and, perhaps more importantly, whether they are in a position to cope if anything goes seriously wrong again. These “detailed” tests have been undertaken on 91 banks, including names such as Deutsche Bank and Commerzbank in Germany, HSBC and Barclays in the UK, as well as Societe Generale and BNP Paribas in France.

The worry is that if this is negative we could slip into a second credit crunch. The other worry, as some news has been leaking that certain lenders have walked through these tests, is that they have become a bit of a shambles and cannot be trusted. In other words, if no one believes the results, is this just as bad as a negative result?

Under this shadow, the Bank of England are trying to deal with some contradicting factors; on the one hand the recovery looks like it is petering out, the budgetary cuts are due to bite in the near future and they are even considering boosting their Quantitative Easing policy, on the other hand inflation is still proving sticky and one Monetary Policy Committee member, Andrew Sentance, voted for the second month running for an early hike in interest rates.

Economist Ray Barrell, of the National Institute of Economic and Social Research, told the Times that putting QE back onto the table indicated the MPC were worried about the results of this Stress Test report. He said, “we are sitting on the edge of a volcano and we won’t know until Friday whether it will erupt or not”.

It is sobering stuff, but without trying to be too pessimistic it does seem as if we may have already seen the best part of the year in the mortgage market.

However, too many people like to dwell on the negative, bad news sells don’t you know, and whilst we are all under no illusions that we are still not out of this crises, things may not actually be that bad and will begin to even out.

The reality is probably that the Stress Tests will not actually be too worrying and will have been done to ensure that most banks, but by no means all, pass through safely. So maybe a little rigged then, as my learned colleague Rob Gill says, “I can’t believe even the EU would be so daft as to order a series of tests which could spark a second, European orientated banking crises, cost billions upon billions or Euros to sort out and potentially tear apart the Euro zone.”

What is more, there is of course a positive side to falling house prices and more properties on the market meaning that more people may be tempted back to the market in due course. Mortgage rates are still low, lenders still ultimately need to lend and people still need to move and desire to own their own home.

What is more, people still have a mistrust of banks and there is an increasing demand for independent advice that is unlikely to diminish.

As with everything, sentiment is of paramount importance and if you choose to just concentrate on the negative then do not be surprised when negative things happen. It is much better to be aware of the issues; it is dangerous to be naive, but to concentrate on the positives.

Last word to Rob for another very valid point, “The big risk at the moment is the US talking themselves into a double dip, and they really are talking their way into it rather than there being any underlying causes.”

As individuals, as an industry, as an economy and as a country we should be careful not to do the same.

After two long hard years of credit crunch and recession, with another tough year approaching, who is to say that it is not a good thing for the public to let off some steam and vent their anger, whether misdirected or not, at “the machine”, or the systems that tell us what we should be doing and thinking?

Many of us may be feeling bitter about being let down by people blinded by power, money and glory who refused to accept the realities of how things were changing. The financial crisis has affected every walk of life, many losing jobs and only low interest rates keeping them in their homes. Whilst banks start to make profits again, it feels like a kick in the teeth as the everyday borrower and business still finds it hard and costly to borrow.

Before you think this is an anarchic, communist rant my comrades, it isn’t. In fact, just lashing out at bankers for example, without any thought of the effects is not the answer. Are the everyday bankers who work long hours under enormous stress and treated in a way that the average worker would not tolerate really the ones to punish? After all, MP’s literally took money out of our pockets with ridiculous expenses, whilst Governments globally and regulators failed to spot the risks.

Taxing the banker’s bonuses now will not have the desired effect. It may mean that they set up shop elsewhere, as in this technological age borders mean nothing, which could have a devastating effect on the wider economy. Businesses of all types rely on the banks making money to lend out, on those with high disposable incomes to buy their goods and services, and social services depend on the tax revenues earned out of these people. Every business in the land is in some way affected if our financial sector is not performing.

The London housing market will also be effected which will trickle through to many other areas if demand starts to wane.

I am sure there are other possibilities, rather than just simply taking an “after the horse has bolted”, vote grabbing approach. Will a simple tax stop banks taking unnecessary risk? Or will it just stop it in this country, which given globalisation means we will be affected again anyway?

It needs a sensible approach, based on communication, regulation and common ground. Make the UK the best, safest place for banks to operate in and work to benefit all of us.

Far better to take out rage at the ballot boxes, getting rid of cheating MP’s and buying a simple song that expresses our feelings this Christmas, “Killing In The Name Of” by Rage Against The Machine, the official anti X-factor song.

It is nothing against the marvellously talented Joe, but seriously, give the guy some decent music to express his talents and give us something a little different this Christmas. Something that appeals to the rebel in all of us and sends a message.

As I am sure you can imagine, the Aussies were not shy in coming forward and the questions were fast, furious, incisive and intelligent. I was very grateful to have met such a great bunch of people and whilst I left with visions of answering the phone Coreco Sydney in my beach wear and thongs it was a sharp reminder how a year ago we all seemed to fall off a cliff with no parachute.

As the recent documentaries on TV to mark Lehman’s anniversary show, many still do not realise just how close we came to the abyss of the decline of Western Civilisation as we know it.

It is always good to have sharp reminders, especially as we start to see the welcome sights of the FTSE breaking through the 5000 barrier again, mortgage approvals rise further and house prices strengthen.

While these latest statistics are welcome news, we still have a long way to go before we are truly out of the woods. Mortgage lending is still a fraction of what it could be, as lenders remain very cautious and are only making small amounts of funds available to applicants that are deemed an acceptable risk.

It’s the mortgage lenders that hold the key to recovery, and while prices are rising, as demand for property currently outstrips supply, this will not continue forever without an easing up of mortgage lending, especially to first-time buyers. 

It was interesting to compare the Aussie experience whose banks seem to have missed out on the worst of the credit crunch; they are still lending 90% and have a thriving and tight-knit broking community.

Whilst behind us in many ways, they also seem so far ahead of us in others. Perhaps it is their more laid back nature, or a “tell it like it is” attitude or just the fact that the sun shines more, but I came away positive.

Positive because in making my last point, it rammed something home to me. I told them to embrace regulation as an opportunity, in reality the issues that surround it will be a doddle when compared to the last year, and those of us who come through the incredible circumstances we have experienced, in every industry, not just our own, will be better equipped, more worldly wise, and more adaptable to face the future.

Although we are not naive enough to suggest all is wonderful again, you have to start somewhere and this is as good a place as any.

The Evening Standard called this an historic “Micawber Moment”, after the Dickens character in David Copperfield who “lectures on the benefits of financial prudence”.

This is actually a big deal. It shows that even though we may be over the very worst of the recession there are tough times to come, and we will not be able to simply spend our way out of it as the general public’s habits seem to be changing rapidly. A combination of sudden financial prudence in the average high street and a continued reticence by lenders to lend mean that for all the recent good news, there is still a sense of grim realism.

It is indeed a topsy-turvy time for the economy with some gloomy stories around after last week’s relatively cheery news. This bumpy rollercoaster ride towards eventual recovery is likely to be with us for a good part of 2010.

There are now two distinct parts of the market with the recession trickling down to effect the high street and the ordinary punter, whilst the top end of the market continues to poke its head gently above the clouds. This to me is a good sign, a sign that shows we are on course to come out of this in the not too distant future.

So whilst there are still hard times and clouds ahead for many, peppered by the occasional thunderstorm, the sun is at least trying to burn through.

If this is the case, then why have rates not decreased?

For me Lenders at the moment are pricing based on three areas; cost, profit and fear.

The lenders main argument is around the actual cost of funds, and there is truth in their argument that it is not as simple as just looking at LIBOR or SWAP rates anymore. The traditional relationship between Lenders interest rates and Libor / Swap rates has changed completely and, although it still has a bearing, there are other factors in play.

For example, lenders pricing models now have a lot to do with Capital Adequacy requirements, which are defined as the ratio of a banks’ capital to its assets. In other words, regulators try to ensure that banks and other financial institutions have sufficient capital to keep them out of difficulty.

These Capital adequacy requirements have existed for a long time, but are getting tougher and more defined through European legislation such as Basel II, and this means in crude terms that the capital cost to lenders offering 90% is between 5 to 7 times more than offering say a 60% loan.

Actually the 60% LTV products are pretty competitive and tracker rates under 3% are available as well as, for example, 2 year fixes at 3.69%.

When we look at the 90% Loan-to-Value market we see some eye-watering offering from lenders such as Abbey and Halifax with products that start with a 7 !

Lenders do have difficulty here, as on the one hand they are asked to lend more but on the other hand legislation, which is rightly asking them to price for risk, is tying up more of their capital and making it more expensive to do so.

The second reason is profits which no matter what their protestations to the contrary, lenders are taking this opportunity to repair their balance sheets and increase their profit margins. Let’s face it, we need lenders to do this to a certain extent as weak banks are no good to anyone as we have found out, but this still feels like a massive kick in the teeth to consumers who helps to stabilise these institutions. I also do believe that they could do more to assist customers, but with a distinct lack of competition driving down rates there seems little to force them to do so.

The third issue is around fear. The fear of a lender sticking their head above the parapet and being overwhelmed with applications which they cannot cope with or have the funds to meet. Demand is still there and growing all the time, particularly at the top end of the market which will begin to trickle down over time, and the last thing any lender wants is to be inundated so that their service levels disintegrate.

So although LIBOR, and indeed SWAP rates have dropped slightly, this combination of factors means that I would not expect a swift reduction in rates by the major lenders. Although you will continue to see lenders dipping in, drinking their fill and then ducking out again from time to time.

It is getting more difficult to keep up to date with the different product offerings as they are often pulled as quickly as they are introduced and I expect this to continue for some time yet.