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.

It began with some positives from the previous week; UK growth was confirmed at 0.5% in the 3rd quarter of this year and the Government launched its much anticipated Housing Strategy, pulling together a range of announcements with a couple of new ones to try to stimulate growth and return some confidence back to the house building industry.

Whether you agree with the content of this or not, the point is that at last the Government is trying to do something to help stop a housing issue become a full blown crises. It looks like there are two main strands to the policy, which is firstly set out to bring back some confidence, (key word that), to the house builders. For the most part they seem quite pleased with it all and let’s face it, if builders are not building at all there is not much hope for much needed housing supply.

The more contentious issue is around the so called 95% LTV guarantee. I have had more than a few twitter banters this week around this with some commentators and journos suggesting that this is creating a false market, lending to people who otherwise would not be able to buy and putting the taxpayer on the hook when it all goes Pete Tong. I disagree.

The reality is that the taxpayer is the last resort; it assumes all these buyers will not be able to pay their mortgages, slip into negative equity and subsequently get repossessed. The claim that they will take out loans that are not affordable is plain wrong. In reality the loans will only go to people who in a “normal” market can afford the monthly payments of a 95% LTV mortgage but are struggling to raise the “abnormal” levels of deposits.

If they can afford the loan at say 3.5 or 4 times income, (my guess is that it may be more stringent than this anyway), so what if they slip into negative equity? We have to get out of the view that a house is a short-term investment. For most, here’s a novel idea, you could always just live in it – it is a home.

If people are then forced to move for whatever reason lenders should be big enough to underwrite the reason effectively and work out a sensible plan. If I have a 120% mortgage, have no issues with the payments and need to move to a similar property in another area keeping 120% LTV, fine. It is affordability that should govern everything – get that right, with a sensible degree of comfort then issues will be fewer.

Whilst the Euro turmoil is starting to turn into a full-scale endgame with the markets becoming more and more convinced of an EU zone break up of some description, we may yet need our tin hats and bayonets. However, as an industry we need to welcome every little move made to try to improve matters.

The real issue, like an annoying soap opera you don’t really like but can’t help watching, is still playing itself out in Europe. Rumours are both good, that the IMF is preparing a EU600 billion bail out of Italy to solve its issues, (denied by the IMF for now) and bad, that ratings agencies are poised to basically downgrade the whole of Europe causing further issues, (not denied)!

The mortgage market however is still busy re-pricing upwards on-the-whole, however there are the odd moves downwards especially in the higher Loan-To-Value bracket where 85% and 90% LTV lending is improving, at least as far as the actual rates are concerned.

In the last few weeks we have seen the likes of Northern Rock, Nationwide, Woolwich, Coventry, Natwest, Halifax and Abbey all become more involved in this market which is a real boost.

There are still, however, some other lenders who see their 90% rates as mere window dressing however, in other words happily proclaiming that they support this sector of the market, but not quite for you, or you, oh and you don’t quite fit either…You get the point.

Ha ha ha ha ha ha ha ha ha ha ha ha ha ha, (stop it, ha, my, ha, sides hurt, ha).

Actually maybe that’s a little disingenuous, as to be fair at least they are giving the impression of supporting the average mortgage borrower and their rates have been consistently attractive. However, in making this comment whilst trying to put the proverbial boot in to mortgage brokers who they clearly see as an irritant, (who needs independent advice pah, advice is for wimps), they are opening themselves up to closer inspection.

So, if 9 out of 10 people who go through their door genuinely go on to get a mortgage offer then that is brilliant. It is so brilliant because it means that there is no mortgage issue at all and I would urge everyone who needs a mortgage, first-time buyers, foreign nationals, the self-employed, those at high loan-to-values, those whose income is from multiple sources, who need a guarantor, who may have a little credit blip, who are on a Visa, who need to stretch beyond the published 4.5 times income multiples, etc, to get down to a branch pronto before the queues get too long. You get my drift.

I have no issue with the fact that HSBC do not deal with brokers, seriously I don’t. Of course I would love them to and even sent a cheeky email to them recently asking them for a pilot, but I don’t like the fact that a 1st time buyer or anytime buyer for that matter, can take out the biggest debt they are ever going to have without getting any advice.

I also have an issue with blind stats like 9 out of 10 blah blah. The reality is probably this :-

“Of the people we see that come through our door for a mortgage, who, after speaking to our mortgage “specialist” to confirm they fit our published mortgage criteria and can demonstrate their affordability and have a clean credit score, who we then allow to actually complete a mortgage application form, around 9 out of 10 receive an offer, perhaps not the exact offer they asked for, but an offer nonetheless.”

In truth, that is still pretty good given the market at the moment, but to give a blurred message without the full explanation when criticising others, is perhaps a little off.

So, dear HSBC, what percentage of the people who walk through the door, go online or phone up wanting a mortgage actually get the mortgage offer they asked for? I do not believe it is 90% – sorry, I just don’t. Also, how many clients accept that offer and go on to complete?

If it is true then why do, as the very wise Ben Thompson, managing director at Legal & General mortgage club, said: “…direct to consumer only mortgage products make up just 19% of all the mortgage products available in the UK and HSBC’s direct only offering represents 2% of this direct only market.”

The statement from HSBC also said that “The bank’s strategy is that it believes it is best placed to sell its own mortgages” (fair point) … “and that lender and borrower need to deal with each other during the sale process to make the best lending and borrowing decisions.”  (Well, if the lender is providing independent advice then ok, but what if the best option for the borrower is a 3 year fix and the lender only has a 2 or a 5 year?).

Even more intriguingly, Peter Dockar, head of mortgages at HSBC, said: “Mortgage customers used to rely on brokers for the best deals but this is no longer the case”.

Unfortunately this shows a misunderstanding of what brokers do. There have always been direct lenders who sometimes offer the “cheapest” headline rates, (when I started it was always Britannia). Then the pendulum swung to brokers because lenders needed the volume and quality they provided, but that is still not the point.

The point is that mortgage customers have always relied on brokers to obtain the right deal for their circumstances.

If it was just always about the lowest headline rate, well then you don’t need me. Don’t worry about the fees, penalties, flexibility, portability, suitability, potential lifestyle changes, timescale, deadlines, service etc..

In fact, if HSBC really offer a mortgage to 9 out of 10 who walk through the door, within the required timescale to secure the property, then I humbly apologise and well, to be honest you don’t need me either then.

Anyway, never mind that I’m off there now to remortgage my 90% interest only loan…er, sorry, what do you mean 2 years full accounts…?

First tried back in 1961 as an “experiment” whose results are still disputed, this involves the Fed selling short-term bonds and, here’s the twist, replacing them with longer term ones. The result is that as more long-term bonds are purchased interest rates should fall, (it’s a supply and demand thing, sort of).

So whilst the US relies on Chubby Checker to help lift them clear of another dip into recessionary squalor, the question is what affect will it have on us? The markets seem initially to be unconvinced, as whilst the yields of 10 year bonds will fall, recent studies suggest that last time the actual effect on mortgage rates and actual borrowing costs was negligible and, let’s face it, interest rates are already very low, so our problems run deeper.

The key to this policy is that no new money is put into the system, so it is crucially different to Quantitative Easing. If SWAP rates do fall accordingly as a reaction to this then great, but will this actually stimulate more lending to individuals and businesses?

Back at home the Bank of England’s MPC, now all firmly singing from the same hymn sheet, are contemplating a new round of QE themselves to help stimulate things, with November the favoured date for another £50 billion or so.

As far as the beleaguered UK housing market is concerned there are deeper issues still and we need some radical thinking and one or two experiments of our own.

Housing policy needs a radical overall, builders need to be supported, a North-South divide is getting more and more pronounced and the social issues that arise with a population unable to move are far reaching. Local Authorities are struggling to meet their social housing allocations and homelessness continues to grow, which is shameful in this day and age. Housing is in danger of being the preserve of the well off or the fortunate.

The strange thing about our industry, however, and one that is contradictory is that it feels better. Is that just because broker numbers have fallen so dramatically that there is more to go round? Most brokers I speak to say that things have picked up – is that just a London thing?

One pleasing aspect for us brokers is not just the fact that lenders are now tapping us on the shoulders and asking for more business but the return of the smaller building societies who, not able to just compete on price, are looking for new ways to lend again.

These lenders are able to eschew the frustrating tick box mentality of those banks who claim to offer the very best rates, (the reality being that clients are victims of the long, drawn out, “Yes, Yes, er No” approach), and instead offer the ability to discuss trickier cases with a real decision maker on day one.

If the property market is to kick forward once more, then this lending is essential in the new world where credit and risk rules the roost.

Whilst the threat to all of us is a second retreat by lenders triggered by, for example, a further disintegration in Europe or the mighty US twisting too far we all end up shouting, we need to make sure that as an industry we are heard louder than ever.

We need new ideas and some radical thinking to meet the challenges we face.

In truth the average consumer still feels like nothing has really changed, the technicalities of a recession are unimportant, it is how they feel and for most, things still feel tight.

However for all this talk I do get the feeling that most are taking a glass half full approach and despite the gloom the good old British spirit has kicked in. A cursory walk around the City outside our office and you can see the change. Offices are filling up, new tower buildings are being erected and bars are full in the evenings. There is an acceptance that we are where we are and we need to make the most of it.

The Mortgage market is no exception and we have been pleasantly surprised how the level of enquiries has held up over the traditional Summer lull, which quite frankly never really happened. In fact, seasonality seems to have all but disappeared, leaving a steady, though relatively flat, stream of business.

Undoubtedly this is a result of several major factors. Rates are incredibly low and all hyperbole aside, when you see fixed rates for 3 years below 3% and 5 years a smidgeon over it is hard not to react if you can. New tracker products are now lower than even the most competitive lenders’ variable rates so remortgaging is back in vogue.

The most pleasing aspect for us brokers is not just the fact that lenders are now tapping us on the shoulders and asking for more business but the return of the smaller building societies who, not able to just compete on price, are looking for new ways to lend again.

These lenders are able to eschew the frustrating tick box mentality of those banks who claim to offer the very best rates, (the reality being that clients are victims of the long, drawn out, “Yes, Yes, er No” approach), and instead offer the ability to discuss trickier cases with a real decision maker on day one.

If the property market is to kick forward once more, then this lending is essential in the new world where credit and risk rules the roost.

Of course there are still potential dangers ahead; although the reality is that in the short-term at least, inflation and potential interest rate rises are low down the list. With the US making clear that they do not expect to raise their rates until 2013 there is every likelihood, especially with weakening growth figures, that the UK will not see a rate rise until mid 2012.

So, whilst everyone knows that the next change in interest rates will be upwards, we could be seeing a further round of Quantitative Easing before we see a rate rise.

The threat is actually a second retreat by lenders triggered by, for example, a further disintegration in Europe or the mighty Bank of America seriously faltering and pushing up the cost of funds and stifling lending appetites.

I make no apologies therefore for suggesting that the next few months could well represent one of the best opportunities to purchase or remortgage. The remortgage benefits are obvious as rates are so low.

On the purchase side the lack of stock is obviously an issue, but whilst this is keeping values steady the gap between vendor aspirations and actual purchase prices seems to be easing. There are also more affordable rates at higher Loan to Values that will help first time buyers.

It will be interesting to see what the rest of this year holds, but I for one will continue to top up my half-full glass.

This was contradicted by a Rightmove report that stated that First-Time numbers were dropping seriously, with only 23% of those looking to buy in the next 12 months being first timers, whilst 7 out of the 11 UK regions now in “first-time buyer blackspot” territory. The exception was of course London, which was still holding up.

Summoned to the BBC on Saturday to try to explain this, my view is that whilst the way the media report these stories sometimes blurs the differences, they are actually measuring different things, with the CML looking at actual loans taken last month and Rightmove looking at those who intend to buy.

So, having just come out of a more active period, which is reflected in the CML stats. for last month, we are now entering a quieter stretch, with the summer lull exacerbated by the financial situation in recent weeks. Therefore, the forward-looking Rightmove stats. are also not so surprising.

In other words, both surveys are correct but you can see how the average consumer is easily confused when faced with contradictory headlines on separate days.

There is some definite good news however, with Halifax indicating that first-time buyer affordability is at its highest since 2003.

On top of this, Moneyfacts has reported that the number of products available at higher Loan-To-Values, (LTV’s) are the highest since the crises began. In February 2009 there were just 3 products available at 95% LTV, now there are 35; whilst the number of 90% LTV products are up from a low of 71 to reach 275, representing a good deal of choice.

The cost of such products have also steadily reduced over the past few months and whilst they may appear expensive at first glance compared to the low Bank of England Base Rate, historically speaking these are still competitive deals.

Whilst affordability and choice seem to be improving the issue is still the number of properties available and the number of lenders who, whilst advertising the higher LTV products, make it difficult to actually obtain them.

First-Time buyers have been in the news as ever with further reports of the difficulties faced with getting onto the property ladder. In fact, as our own research suggests, the average deposit now stands at £54,923 and a whopping £138,624 in London, property ownership  may seem to be becoming the preserve of the “haves” rather than the “have nots”.

In fact, an article I wrote for MoneySavingExpert.com about this subject provoked some lively comments : Glimmer-of-hope-for-first-time-buyers

However, the good news is that there is a light at the end of a very long tunnel for those with property owning aspirations. Mortgage lenders are beginning to relax slightly and there is now a smattering of products available at 90% Loan-To-Value, with at least one lender offering 95%. Whilst the cost of these deals may seem expensive compared to the historically low Bank Base Rate, historically speaking these are pretty well priced.

Quite a few lenders have reduced their rates further and with the latest UK growth figures showing only a small rise, basically balancing out the previous quarter’s loss, most economists agree that any rate rises will not come until August at the earliest.

The discussion was of course the much publicised Mortgage Market Review, (MMR) which in many people’s eyes threatens to derail any hope of recovery in the housing market and has certainly at least got Mr Shapps all fired up and even the Prime Minister himself concerned about the economic effects of the proposed regulation.

In theory, it is hard to argue with the FSA that they do mean well and want to try to ensure that we do not have a repeat performance of the past few years, but this does seem to be a classic example of locking the stable doors after the horse has bolted.

In actual fact, there is a saying that regulation should be tightened in boom times and relaxed in tough times, which is what should have happened, making the whole thing “counter-cyclical” as Andrew Verity called it this morning.

However, we are where we are and whilst some of the measures may mean well Mr Shapps is right to be concerned about the consequences.

Rightly or wrongly the housing market is important to the economy as a whole and if we cut out whole swathes of borrowers from the market now lending levels will stay low, repossessions will rise and house prices could fall dramatically.

It may seem rich to say now, but lenders have been quick at self-regulating, cutting out self-certification, high LTV lending and pricing for risk. Whilst no-one wants a return to the days when you just needed a passport and a smile to get a loan, there is not much to be gained now from, as Mr Shapps said, “micro-managing what should be a naturally competitive market”.

Limiting someone to borrowing 30% of their net income, as an example, may sound nice in theory but in practice raises many questions, not least the question what is someone’s income?

Not everyone is straightforward, should someone with children and committed expenses be able to borrow the same as a single person with no dependents and no debts? One size does not fit all.

Affordability is key and lenders now have robust affordability calculations that must surely be more relevant than simply saying you can only borrow 3 times your income.

Also, when owning a house peoples lifestyles change, it is part of growing up. The FSA seem to be assuming that people behave in the same way with and without a mortgage. Most clients I see are all realistic that their monthly “entertainment” expenses or savings will change once they have a mortgage.

Is it also really worth banning self-cert when no lenders offer this product? Or ending interest-only loans when this is a legitimate repayment method for many people. The CML do not believe interest only is detrimental to the market and neither do I. The key is around the advice process.

The focus needs to be on making sure every customer gets proper advice and fully understands the costs and responsibility in taking a mortgage, and how rates can change. Today a First Time Buyer with no experience can still borrow vast amounts of money direct from a lender with no advice and this is what needs to change.

So what do we think can be gained by today’s meeting?

Well we don’t really know if this is just political posturing or if the Governments views will fall on deaf ears, but the FSA wanted feedback from all areas and the Government of the day have every right to raise their concerns.

Whilst I do not expect critics of the MMR to be cheering as Mr Shapps waves a white paper declaring peace in our time, discussions between the two parties should have started ages ago and should be regular.

The best outcome is a sensible partnership between government, regulator, lender and broker working together to ensure customers are given all the information and tools to be able to make their own choices in acting responsibly.

In other words making sure that every person obtains the proper advice they need.

On the face of it, if certain commentators are to be believed, the turmoil in the property market is set to run well into 2013, with low interest rates, more Quantitative Easing and a fall in property prices of at least 20%. However, this is not a view that I subscribe to for several reasons.

For me, with the benefit of hindsight, 2011 will prove to have been the year that many of the best property bargains were bagged.

If we are to follow a general cycle of recovery in 2012 and beyond, it therefore follows that 2011 will prove to be the nadir for house prices and also interest rates. As the economy improves and confidence returns to the market, demand for property will grow once more. Given that there is a chronic undersupply of quality property, particularly in areas like London, house prices will begin to recover.

I still believe that house prices in the South East will still rise by around the 3% level this year as a whole, with any falls being concentrated in the first half of the year. Nationally, there will of course be regional variations over the year, in some places I expect these to be pretty dramatic.

This will also coincide with an increase in interest rates as the Bank of England finally has to start controlling inflation, returning interest rates to more “normal” levels. The days of tracker rates at 2.5% and 5 year fixes below 4% will seem a long way away.

In fact, interest rate changes could be seen as early as the Spring, if people like Andrew Sentance begin to win their argument that rate changes earlier rather than later are the best method of keeping a lid on inflation as the economy improves. I would not at all be surprised to see a Bank Base Rate up at 1.5% – 2% by the end of the year.

Certainly it is unlikely that we will see general mortgage rates in the latter half of 2011 being as competitive as they are now. For those looking to remortgage and finally enjoy the sanctuary of a fixed rate, I would be looking to do something within the next few months.

In other words if you do want to take advantage of low interest rates and competitive house prices, 2011 will seem to be as good a bet as any. In fact, it could prove to be the best time for many years to come.

The problem for many this year however, especially 1^st Time Buyers, will be the ability to take advantage of such a situation given that mortgage lending will continue to be the preserve of those with large deposits, perfect credit and steady jobs. Those with just a 10% deposit, the self-employed and erratic income sources will find the going particularly tough, being constrained by tough lending criteria and, for those lucky to still qualify, priced out by higher than average interest rates.

In fact, if the Council of Mortgage Lenders, (CML) are to be believed, mortgage lending could well dry up once more due to a combination of having to pay back Government loans, tougher capital adequacy requirements and the FSA’s latest set of proposed regulation. Whilst on the whole I expect gross lending to be similar to the figures for 2010 of around £135 billion, (actually maybe a slight rise to £140 billion), and net lending to almost certainly drop further as many continue to pay their loans back, I believe that this is more of a veiled threat to the FSA and Government with regards to further regulation than anything else.

There is talk of more lenders heading back into the market this year and brand new lenders following the likes of Metro Bank to bring in some much needed competition, which, whilst not changing the landscape dramatically, will assist in bringing in some more lending capacity.

It does seem to be the case that at times like these many commentators like to make out that things are worse than they actually are, so it is down to each individual to decide whether to wallow in despair, or to concentrate on only that which you can control and get on with making the best of things.

There is no doubt that a recovery will be upon us in the next couple of years. Whether this is sooner or later does not really matter, as we all know that the best deals are done just before the upturn is in full swing.