Tag Archives: Mortgages

FCA stresses mortgage affordability, competition and innovation

FinTech brgJonathan Davidson, Director of Supervision retail and authorisations at the Financial Conduct Authority (FCA), delivered a keynote speech at the Building Societies Association Annual Conference.

Davidson stated that the FCA has a keen interest in strategy:

  1. strategic factors which shape the landscape
  2. resulting strategies and the business models
  3. how business models create a sector that works well for consumers

He acknowledged some of the strategic questions the building society sector is dealing with, namely:

  • the digital challenge,
  • the growth of challenger banks
  • the economies of scale of the large banks

Davidson also shared some of his thoughts on how the FCA approaches interventions that have an impact on building societies and their respective strategies and business models:

  • The FCA expect firms to have their customers at the heart of how they do business; how they develop products and services and how they treat customers.
  • Promoting competition is not just about preventing market share dominance; it’s about ensuring that building societies and other firms have the opportunities to reach consumers and grow.
  • Innovation if not managed appropriately they can lead to serious risks that can prove existential to individual firms and taken to their extreme could potentially affect a whole market; affordability and responsible lending rules serve to prevent the return of the irresponsible lending practices pre-crisis and so protect the strategically important mortgage market.
  • The FCA is concerned as to what will happen to borrowers in the event of a rate rise; over a million borrowers have never seen an interest rate rise.
  • FCA recognises the importance of meeting the financial services needs of older consumers; it will publish a series of recommendations in 2017.
  • The FCA mortgage market study will also look at consumers’ ability to make effective choices and whether the tools available such as price comparison websites, best buy tables or interactions with advisers, do in fact effectively help customers source the products that best meet their needs.

The UK’s 44 building societies approved £57.8bn in new lending in 2015; some 395.3k new mortgages giving them a 26% market share. At the end of 2015, they held mortgages with a value of £265.2bn; 21% share.

Retail savings balances increased by £10.4bn and at the end of 2015 building societies held savings balances of £246.6bn; 18% share of the UK market.

The BSA believes that as customer owned organisations, that its member firms genuinely have their customers at the heart of their businesses. Intuitively this sounds right, however, it equally raises the bar for boards and senior executives to ensure their firms consistently achieve “good customer outcomes”.

Strong product governance is a prerequisite, not just at the point of sale but throughout the life of the relationship with customers/members. With huge quantities of mortgages being written on short-term fixed rates, the moment of truth will be the re-pricing of mortgages on roll-over.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.

Standard Variable Rate – Do Nothing is No Longer an Option

 “Generally speaking, everyone is more interested in doing nothing than doing anything.” —Gertrude Stein

It is doubtful that Stein, a leading American poet and writer of the early 20th century, was referring to mortgage lending in the UK when she wrote about the temptation of inactivity, but this sentiment arguably sums up the default position of lenders with regard to over a quarter of a trillion pounds of Standard Variable Rate (SVR) back books. Continue reading Standard Variable Rate – Do Nothing is No Longer an Option

Mortgage Book Management: Would Your Business Pass the Retention Challenge?

The UK economy is enjoying continued growth, with GDP estimated to have increased by 0.7% in Q2 (source: Office of National Statistics). As the economy remains on target to grow at 2.6% in 2016, the markets are anticipating an interest rates rise in H1 2016. 

This expectation is causing a strong rebound of in the UK mortgage market, particularly in the remortgage segment. Berkeley Research Group and Nomis Solutions have launched a series of market commentary and insights that will be released at regular intervals throughout the autumn of 2015. Mortgage Book Management: Would Your Business Pass the Retention Challenge? is the first opinion piece of the series discussing three main challenges lenders face. Continue reading Mortgage Book Management: Would Your Business Pass the Retention Challenge?