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UK Chief Financial Officer David Postings says the symbiotic relationship between borrower and lender is now more complex than at any time in my career.
Speaking at UK Finance’s annual Mortgage Dinner Report, it was highlighted that “well-intentioned public policy” is one such issue.
He highlights the impact that improved fire safety regulations have had on the apartment market.
Postings states that no one will argue about the lower standards, but he says: “The rapid introduction of new standards and retroactive means that people were not only concerned about fire safety, but also extremely concerned about the value, marketability and collateral of their property. This affects their overall sense of security.”
However, he argues that the industry needs to work with politicians “to avoid the same on a scale when we’re trying to zero out the housing stock.”
A UK Finance report on net zero income homes highlights the need for tax changes and incentives to encourage greening the housing stock and help the most vulnerable make the transition.
The publications comment: “I worry that a simple policy option to push lenders to go green at a pace that is essentially only green balance sheets, not housing stock, might be optically difficult to resist.”
Using this approach can have “the unintended consequences of either creating energy efficient facilities that cannot be mortgaged, or penalizing homeowners who cannot easily make changes through higher interest rates or local environmental taxes.”
However, Postings says both will create a new cohort of property prisoners who, as creditors, he suggests, “wouldn’t want that to happen.”
“Therefore, we must remain vigilant and emphasize the need to provide incentives that promote a sense of security and inclusion. The alternative undermines people’s trust in housing.”
He also urges the industry to be “thoughtful” about the application of the new consumer duty.
“This is another well-intentioned idea. Who argues that lenders are not required to provide a good result for their clients?
“Recently I was discussing this with senior members of the clergy and pointed out that the term “good” has no definition and will probably be in the eye of the beholder at some point. For a product like a mortgage, this can happen at any point in his life.”
The records suggest that in the absence of clarity, lenders are likely to take a “cautious approach”.
“This will almost certainly result in fewer people being able to access mortgage products and this will affect people’s sense of security and their ability to own their own home or improve the home they already own.”
However, Postings says that this feeling is “the memory that I think is the most disturbing.”
“People make decisions based on prevailing rules and regulations. We are seeing more and more how these rules are changing.”
“During a fast rise in interest rates, people naturally become more cautious. We’ve seen pretty bleak house price forecasts and they don’t make people feel better.”
“If potentially larger bills and possibly larger loans are piled on them to finance modernization, it is inevitable that people will feel less secure. We are lucky that the labor market is still quite buoyant. If this changes, housing security could be even more threatened.”
According to Postings, the industry has made 16.5 million contacts with borrowers in the last 12 months to indicate available support if they run into financial hardship and expects to receive 20.5 million contacts over the next 12 months.
In addition, last year there were 3.9 million contacts with customers running out of fixed-rate mortgages, and another 4.4 million contacts are expected in the next 12 months.
In addition, just under 200,000 customers received individual mortgage relief during the same period, and two million received help managing their finances, including budgeting tools, access to debt counseling and breathing room.
The publications call on the industry to “push policy makers to realize that their actions play a huge role in meeting this pressing need for a safe home.”
He concludes: “We need to get them to think about changing their policies in the same way that public broadcasting does.”
“We as an industry have a big role to play in this debate and if we do it right, we will come together to celebrate homeownership and the security it will bring for decades to come.”
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