I have been paying alot of attention to the mortgage and financial press as you would expect, reading with both amusement, hearty agreement and utter despair some of the comments with regards to FSA regulation, self-certification, the behaviour of lenders and brokers, the proposed breakup up of some of our much maligned banking institutions, whilst also watching the pleasing plethora of new rates flooding the market.

There is one overwhelming thing that keeps rearing its head in almost every article I read – criticism. As one of my colleagues here said to me the other day, don’t you think everyone is now a critic? It has become too easy to judge everyone else and criticise their views, opinions and decisions, often vehemently and without thinking.

In the national press and on our TV’s criticism is everywhere, it is the new national obsession. Every weekend we each become expert singers, dancers and ice skaters, shaking our heads and muttering over every slight missed note or crooked arm, not bothering to think how difficult it may be for some kid who has never performed in public before trying to sing a legendary song that most so called “stars” would mime their way through. Oh and by the way, what the hell is she wearing?

This passes through into our industry and spills out into our articles. It almost seems that we have lost the power of empathy, or the art of civilised discussion. It seems too easy to simply comment via criticism.

I am not saying that each of us receiving “constructive” criticism is not a good thing, of course it is when it is done in the right way. Mostly, however, the easy quote is not done that way.

How about the FSA’s new proposals? Mr Boulger in his blog produced a passionate, yet reasoned argument about how the FSA had misunderstood the issues. Yes some of it was incendiary, but some of the comments it produced verged on just plain vindictive. (Before I defend the guru, let me just point out that he is guilty of some of his own unthinking criticism himself which perhaps he should take note of, but I’m an understanding chap! Is that criticism?)

One particular quote mentioned the word “dinosaur” and a few that all those who wanted a self-cert loan were “liars”. Hardly a well-reasoned response. Who else in our industry would spot some of the flaws in the FSA’s work or have the balls for that matter to publically raise it?

As an industry under threat we should be working together, not just taking any opportunity to criticise each other. Personally I believe that fast track should be banned rather than a well-documented self-certification product.

What about lenders? Do they really owe brokers a living? Many of them have supported us well for years and when they need a bit of understanding as they battle for their own survival, just blindly criticising their every move helps no one.

I see a lot of moaning, a lot of blaming instead of looking internally and changing attitudes. I saw the inspirational Paul Merrigan talk the other day, and he recited a famous JFK quote that has never been so apt.

“For time and the world do not stand still. Change is the law of life. And those who look only to the past or the present are certain to miss the future.”

So, to unashamedly quote Fleetwood Mac, (having watched a documentary about them boy they have had their ups and downs, but are still going strong), we should not stop thinking about tomorrow. We need to look to the future and start being positive with each other, remember how to empathise, to argue passionately, but constructively. And, most of all, to remember that it is a singing competition Simon !

Just when you thought Big Brother had been cancelled, along came HSBC and within minutes managed to get one of my quotes pulled from a website.

What got me into trouble was not this bit “Another headline-grabbing mortgage range and rate from the HSBC machine but borrowers shouldn’t get over-excited. HSBC’s tactic is to create a buzz, take in as many applications as possible and then embark on a ruthless cherry-picking exercise whereby it only lends to those it considers worthy.

I think that is fair enough, obviously not all applicants will get access to this product, and why should lenders not cherry pick at present?

But this part “Reports are that the percentage of applicants declined by HSBC is over 70% due to incredibly inflexible lending criteria, while applicants can often wait for weeks for any kind of progress, which doesn’t help if you are trying to secure a property in a market where there is a low supply of good properties and they are being quickly snapped up. It is often a good idea to run a secondary application with another lender when applying to HSBC as a backup.”

The next thing I knew a representative from HSBC was on the phone telling me not to quote untrue figures and that “HSBC announced at our half year results that our acceptance percentage for mortgages in the UK was over 7 out of 10 applicants. This continues to be the case.”

Interesting. I did not know we are not allowed to question the might of HSBC? So what about those clients who walk into the branch excited about getting a cheap mortgage who have not read the small print, who want to stretch income, have a credit issue in the background, cannot quite prove their income, suffer a down valuation, have an unsuitable property, do not have bonus payments accepted, or have too many properties in the background, etc.?

The industry has been awash with stories like this from many lenders, not just HSBC, and many brokers have stories of clients turned away from HSBC after waiting for a long time for a decision, as backed up in the press over the weekend.

Another point to mention is that if 7 out of 10 applicants get accepted, why did HSBC go into partnership with a leading broker? Which I thought was a good move by the way and I hope the pilot has been successful.

The exact figure I heard directly from a source who worked in an HSBC branch was that they cannot assist over 70% of people who come into the braches for a mortgage. Don’t get me wrong, I am not having a go at this point, as this is not unexpected for those that go direct to a lender rather than through a broker. Brokers will know which lender, if any, is best suited to help with an individual’s circumstances. Applying direct can be a bit hit and hope unless you have really studied the lending criteria.

I think HSBC are misreading my thoughts and getting worriedly uppity. I am talking about people who come through the door wanting mortgage advice – whilst they may be talking about those who get through the pre-qualifying stage and actually, after receiving “information” on the products, are allowed to fully complete an application.

Semantics eh?

 I am more than happy to see the official stats on actual applications versus offers, and my intention was not to poor scorn on their official reports, but raise a point that these products are nice but many who think they can get them actually can’t.

There are already headlines that these offerings could lead to a new mortgage war, but I can’t quite see it. Rates have already begun to fall slightly this week as SWAP rates have fallen, but whether other lenders will suddenly throw caution to the wind and follow suit is doubtful whilst profit, sensible pricing and returns still rule the roost.

My point is that just reducing rates at 60% LTV from already low levels is of course a good thing, but it does not really help the current situation we find ourselves in. It helps a section of the market that is not having any issues obtaining finance.

It doesn’t help most First-Time Buyers, or those who cannot remortgage and are worried that rates may rise soon, it also doesn’t help the small businesses who desperately need small amounts of funding at competitive rates, or those charged ever inflated fees for going overdrawn or getting tuppance-halfpenny interest on their hard-earned life savings.

I feel I am entitled to express my opinion, and whilst I do not intend to upset anyone or mislead with made-up statistics, (something I have always been careful with having been the victim of in a previous life), I do think it was a fair point to make.

No doubt the discussion will rumble on and I wonder who will spring to HSBC’s defence. Perhaps if HSBC engaged fairly with all brokers this confusion and misunderstanding would not have happened.

Feel free to let me know your experiences or correct my assumptions. That is what opinions are all about and I am always happy to be corrected, but if you are telling me I am not allowed to pass comment or question a large organisation…?

It was said with such an air of confidence that you could not help yourself but be carried away on a euphoric wave of good feeling – hell, I almost pledged my allegiance to the American flag, (though I didn’t).

There is indeed however a lot of good news around, but also many guarded warnings and whispers of negativity. The shape of the recession is still not known and even Sir Martin Sorrell has chipped in predicting that it will look like an italicised “L” shape, though not sure if that is a capital L or a little l, I guess capital L.

This week the main news has been around house prices with Nationwide stating prices have risen for the 4th month running, and this has even been trumped by the latest “actual” figures by the Land Registry which show that house prices rose in July by 1.7%, which represents the highest monthly growth in 5 years, since July 2004 to be precise.

This gives an annual drop of 11.7%, with many commentators now suggesting prices may end the year in positive territory, which must be hard to swallow for the prophets of doom who suggested another 20% fall this year!

As we all know however, this still has a long way to run, and once more properties come on the market, especially if rates start to rise as well, and repossessions follow, then we could see a slight fall back by a few percent. Whatever happens, the great house price crash seems to be over and those hoping for a 40% + peak to trough fall will be disappointed again – how many times can they keep predicting this apocalyptic result?

Well done to the Welsh by the way, who experienced the greatest increase – must be something in the water there.

With GDP falling a little less than expected, and surveys on Confidence showing a positive return perhaps we should be feeling more comfortable that a corner has been turned.

Whether the green shoots are flower buds, or these flower buds bloom, is a matter of conjecture and endless speculation. We shall see.

Good sporting events often have a tendency to induce either mild hysteria or a return of “the feel good factor”, and a few great days cricket, some gold medals in the Athletics, and a bit of sunshine may have helped to do the trick again.

The better news, however, is that much of this good feeling has been rumbling in the background for a while now and tentatively growing in strength. This time it is the turn of the accountants, pessimistic lot accountants in general, (sorry accountants that is a rash generalisation I know!), more precisely The Institute of Chartered Accountants, who have said that their index of business confidence rose to 4.8% in June from -28.2%.

This is the biggest rise in 2 years with IT, banking and finance the most optimistic sectors.

It does all seem to mirror our own experience in conversations we are having with clients. Very few are now saying that they are worried about their jobs, as many believe if they have not already lost it they should be fine now. Many more have suggested that things “seem to be improving” and whilst still cautious, it is a far cry from the doom and gloom of only a few months ago.

More importantly, the media are showing, generally, a level of maturity and understanding of what is going on, reporting the good news in a balanced let’s still be careful kind of way, rather than the we are all doomed headlines of a year ago.

The quote accompanying the above report from Michael Izza of the ICA stated, “While there is no doubt that the UK economy is on its way to recovery, we shouldn’t underestimate the challenges ahead for businesses.”

That for me neatly sums up where we are now. It is time to move forward with optimism, but with caution and with an adaptable plan.

And if England win the World Cup next summer, hold on to your hats…

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.

The Chancellor is looking really mean and determined this time, and I reckon Ali D will be giving it to them both barrels like a streetwise, no nonsense gangster rapper.

As I am obsessed with the brilliant Flight of The Conchords at the moment I thought it may go something like :-
 
I’m the mother flippin’
High Chancellor, I ain’t kidding ya
I’m here to get banks to lend more to ya
I ain’t flippin around this time
Y’all better heed my rhyme

When times were good you got too greedy
With your CDO’s you screwed the needy
You gave ‘em loans they couldn’t afford
And put idiots on your boards

So I’m here to make you pay for your crimes
Don’t mess with me, ‘cos if you cross the line,
I’ll do stuff you can’t erase,
Like when I put Gordo in his place.

I’ll regulate you to the max
On your bonuses I’ll hike your tax
Don’t give me shi about the cost of funds
We just bailed you out with cash by the tonnes  – (it’s hard to rhyme funds!)

So tell me straight, don’t be sittin’ on fences
I didn’t get where I am by fiddling expenses
How much you gonna lend today
D’ont make me take my ball away

I ain’t in to cussin’ or making a fuss
But you mother flippers better get on my bus
‘Cos I ain’t stopping, well, at least ‘till the election
All this power gives me an erection

I’m the mother flippin Ali D – yeh you know me (repeat to fade)

Faced with that I am sure the banks would of course respond by doing the Chancellors bidding.

Alternatively, they will reply to the tune of Rappers Delight in a Sugerhill Gang kinda way, but I’ll leave that one to you.

So I spent most of the past weekend wishing I was up to my knees in a field of mud in Somerset, yes Glastonbury was on and as ever I regretted not actually buying a ticket and making the trip. As they say you have to be in it to win it. But I did metaphorically pitch up a tent in my living room and kick back and relax.

Some truly awesome performances were delivered throughout the three days, but Sunday night produced two of the best with completely contrasting styles. We had a reunited Blur dishing out a raft of classic tracks like Parklife and the timeless To The End, whilst on the Other stage were old skool ravers The Prodigy. This was like the ‘90’s all over again.

So why do I mention this in Monty’s Blog? Well, life is all about choice and to watch both performances live was impossible, yet in the comfort of my own home Sky+ came to the rescue and it allowed me to flick around, rewind and not miss a thing.

This got me thinking, why don’t we do the same with our mortgages, we could just mix and match, i.e. a sensibly thought through fixed rate that has no element of risk just like Blur, you know what you will get and it makes you feel good. On the other hand a more riskier proposition of a tracker rate that has an edge to it just like The Prodigy.

If you manage to combine the two you have the perfect solution.

Matt

It is a great point that Matt raises here, whilst many brokers just go for the easy option, with a little bit of creativity you can actually creat a product which suits your circumstances down to a tee. Enabling you to protect yourself against the full effects of a future rate rise whilst still enjoying lower payments now. Although Blur may say otherwise, there is always another way.

If there is one subject that guarantees to raise blood boiling levels for brokers and lenders alike it is the subject of dual pricing. This type of pricing is nothing new, it has been around for years, although mainly it had been in the brokers favour.

The arguments were simple. By offering better rates to brokers’ lenders, in theory at least, got pre-checked thus better quality clients, did not have to market the products themselves or take the advice risk on. The clients won because they got, on the whole, better quality advice and a much better quality of service than going direct to a lender and not dealing with a decision maker day 1.

Now the boot is on the other foot and we, the brokers, don’t like it.

The lenders argument is as follows. “In a limited market we have a big branch network who cost us money and we can’t have them sitting there twiddling their thumbs. We need to attract clients into the branches to keep them busy and once they are there we need to sell ancillary products such as savings accounts which are desperately needed as we are short of dosh to lend out again.

We can’t just close all our branches, that would not be fair to the local communities or the employees and would be a PR disaster. If we offer brokers the same rates we know that more people would go through a broker, and you would be more successful in selling these products and it would negate our aims.”

Although I do actually empathise with lenders more than the majority of brokers and really do understand their, often good arguments, basically though, what they are saying is that brokers are too successful and people would rather go through a broker to transact!

Getting back to the L&G story then, Ben Thompson, a fine individual and director of mortgages at L&G, stated that dual pricing “is like treating them, (brokers), as second-class citizens. Brokers have long memories and will remember those lenders which have stood by them in difficult times.”

Whether or not the vote was actually a pointless one, (beaks up which Turkeys want Christmas this year), or it was just poor reporting of an important discussion lost in translation, is open to debate. However, Mr Thompson’s comments are interesting and I do agree…in theory.

Brokers do have long memories, I managed to avoid using the Woolwich for a long time as I refused to subject my clients to poor service levels, and now they finally seem to have re-elited themselves and I have had an excellent service from them recently. Really top-draw actually.

If I am not mistaken there are only a couple of lenders who do not dual price, the aforementioned Woolwich, Coventry and Nationwide,who now provide good products and an excellent service. If brokers do have long memories, why are we not all singing their praises, voting for them at all the awards do’s and using them as much as possible?

Let’s face it, some of their dual-pricing competitors’ service is extremely poor at the moment, yet poor old Nationwide and the fabulous Mortgage Works don’t seem to get a look in when awards time comes round. Should they not be feeling a little bit aggrieved after committing themselves to the intermediary market wholeheartedly?

The problem is that lenders know that we have a duty of care to our clients to recommend the best product for them. They know that when things return to normal brokers may find it difficult to steer clients away from market-leading products from providers who were happy to screw brokers when we needed them most. Arguably, they are also screwing the clients when they most need professional and independent advice by forcing them to traipse into a branch.

I do, however, share Ben’s views. What will happen when certain lenders need our love and affection again, in a market where competition is back and rates between lenders are much of a muchness, is that larger groups of brokers, clubs and networks will develop products with and assist those lenders who supported us now.

Now then, is it too early for a Turkey sandwich?

I know I am meant to write about mortgages and property, but looking round at people gamely walking, cycling and finding any means necessary to get into work shows London’s’ resilience, bombs did not stop us so tube strike pah, and why I love it so much.

Now, being politically inclined to the left, I respect people’s right to strike, but over something meaningful. Something worthwhile rather than obvious trouble making.

I think we should all give Mr Crow a taste of his own medicine and all go on strike with regards to him. No milk delivery, no mail, his bank should strike and not allow any money in or out. If he walks into a shop to purchase something the cashiers should strike whether it is bread, petrol or a new baseball cap and trainers. Even cabbies, who secretly may be enjoying the extra fares, but not the extra traffic, come on – solidarity brothers – he can walk.

Let’s make it difficult for him just as he is making it difficult for those of us who just want to do an honest day’s work to help beat this recession.

On the subject of recession, sorry rant over and back to what I should be writing about I guess, apparently it is over! According to a leading economic think tank, The National Institute of Economic and Social Research, official figures show that GDP actually grew again.

As ever the question is whether this is indeed the turning point and that this growth is sustainable, or whether it is just down to the fact that manufacturers have been living off their stock piles for a while that are now beginning to run out and hence need to be replaced. In which case there could be a further dip in due course once these are replenished.

Either way, it is another “good news” story for now, and more of these to come may well have the desired snowball effect on consumer sentiment and fertilise those famous green shoots.