ePolitix.com speaks to Michael Coogan, director general of the Council of Mortgage Lenders, about its annual mortgage industry conference and regulation of the mortgage market.
Question: The Council of Mortgage Lenders is holding its annual mortgage industry conference and exhibition on November 13 - what is the theme of the conference?
Michael Coogan: The theme is 'all eyes are on us'. I think that demonstrates that we recognise the mortgage industry is in the eye of the credit crisis and credit crunch.
We recognise that following the banking crisis in 2007-2008, we have to be seen to help the economy back onto its feet through the recession - both in terms of lending to new customers and ensuring that people can stay in their homes through short-term financial difficulties.
We have the backdrop of a regulatory review that was recently announced by the Financial Services Authority (FSA), and a government keen to ensure that banks meet their lending commitments, having been bailed out by the taxpayer.
What are you hoping to achieve by bringing the industry representatives together?
The day will include a speech from the managing director of the FSA about the mortgage market review.
There have already been some concerns in the industry that the regulator, having been inefficient in its job before 2007, is now reacting with an intrusive and interventionist approach, making things worse rather than better.
So we will have a chance to debate whether the FSA's approach is sustainable.
We will also hear from the housing minister, John Healey.
We have been working with the government on housing policy, whether it be low-cost home ownership or funding for social housing.
One of the challenges the government and industry face is the need to make sure there will be sufficient public funds in the future, if there is a fiscal tightening.
We need to look at how much the private sector can continue to help government policy.
So the aim of our conference is to get industry representatives in a room and talking - about not only today's problems, but about the longer-term future.
Do you think the mortgage industry has learnt from the financial crisis?
There was a debate following Mervyn King's speech in Edinburgh last month that the banks have not learnt their lessons and there needs to be reform.
If you look at the mortgage industry specifically we certainly have learnt the main lessons. The first lesson, of course, is that some products were priced below the appropriate price, bearing in mind the risk.
The companies that have done that are largely out of business.
The banks and building societies that are left active in the market certainly realise that they have to charge the right price, bearing in mind the risk they are taking on.
Unfortunately in the short term, with limits on funding, we have seen two effects.
One, mortgage pricing has gone up compared to what people are used to.
That is not profiteering, but how it is seen by some people.
Secondly some high-risk products, such as those for first-time buyers, are not as widely available in the market. That is because if they are priced appropriately, they wouldn't actually be attractive to consumers.
How does the Council of Mortgage Lenders see the mortgage market performing in the financial year 2010/11?
On November 12 we are updating our forecast for this year and next, and giving the third quarter figures on arrears and possessions.
In 2009, in terms of lending, we are more or less on target for our £145bn gross lending. In terms of new lending (net lending), we see a potential positive number whereas previously we forecast a negative number (a shrinking market).
For 2010 the environment will be one where the future direction of house prices is still uncertain. In terms of turnover there are not as many people looking to move, so transaction numbers will be lower.
We expect lending numbers to be stagnant.
So what we will have, and are already seeing, is a market that is shifting from remortgaging to house purchase, which is helpful for the customers looking to move.
However, with limited funds we are not going to see much improvement in the short term.
There have been some signs that there is extra funding available from the wholesale markets with one or two deals being done recently by large lenders, but we don't expect that to have much impact in terms of the overall lending patterns next year.
On arrears and possessions, the picture has been much better.
We were concerned about the impact of increased unemployment: that hasn't yet fed through, with lower interest rates helping borrowers to stay in their homes.
So I expect our forecast will show that we have actually undershot our original estimate for 2009 by some margin - but with unemployment still rising, we can't ensure that picture will stay the same for 2010.
How is the Council of Mortgage Lenders working with parliamentarians to ensure the mortgage market is responsive to consumers' needs?
One of the things we try to do is keep MPs and others aware of what is going on.
We send regular information through our 'housing finance at a glance' publication.
We also regularly meet groups of MPs from the main parties, and talk to advisers and senior politicians about how the market is evolving.
In terms of meeting consumers' needs, the right balance needs to be maintained between regulation to ensure that lenders aren't irresponsible and have the right sorts of products, and regulation to ensure that customers aren't irresponsible in their borrowing.
We need to have a structure which actually reintroduces what we had before 2007; that is, products in the market for different customers at different times in their life.
That means products for first-time buyers, or equity release for the elderly. Or niche products like Islamic mortgages or buy-to-let.
A lot of that innovation, and a lot of those products, have been squeezed out because there simply isn't enough money.
While we recognise that government has bailed out the banks and it is working with them in a variety of ways to ensure stability, it is fundamental that parliamentarians understand that money flowing through into new consumer loans and mortgages is going to be more expensive than we have been used to.
What should MPs do if their constituents come to them asking for help because they cannot make their mortgage payments?
We have produced and sent out to MPs information about what they should do in this situation. This information is available on our ePolitix.com microsite.
In essence, what we are keen to do - and what is working - is getting the constituents to speak to a lender or an advice agency early. When they do, they avoid repossession.
What the government has done is put in place more debt advice funding, and that has enabled more people to be helped through advice sector assistance at an early stage.
Clearly better communication between borrowers and lenders early on enables an arrangement to be put in place that consumers can keep.
Low interest rates are helping borrowers keep to those arrangements, so arrears are below our expectations.
What MPs can do is emphasise the importance of acting now, not waiting and letting the problem build up.
Customers with multiple credit problems need advice, so they don't have to worry about each creditor but can get their problems resolved in 'one fell swoop'.
Do you think the government's mortgage support and rescue schemes have been effective? Could more have been done?
I think they have done a substantial amount - more than has been done in previous recessions. I think that is a testament to their interest to ensure that we don't allow problems to continue to escalate.
It depends what you think 'effective' means. If effective means getting better engagement by borrowers with lenders and advice agencies early, then yes, absolutely right.
But if you think that effective means that the schemes are being used, no they aren't.
That is because it is easy with interest rates at the current level, for the borrower and lender to manage the situation without having to use the rescue operations and support schemes that the government put in place.
For people on income support, the government has frozen the standard interest rate for claimants at six per cent.
That interest rate is due for review in December, and we are looking for an early announcement in the pre-Budget report that the rate will be kept as it is.
Some might argue that it should be reduced to reflect current interest rates. But something in the region of a quarter of a million customers are still paying interest rates at above six per cent, who would be put at serious risk of repossession if this support is cut back.
So there are further things they can do. I don't think we are expecting a lot of people to go through the homeowner support or rescue schemes.
These schemes are the final step in a long process, so it is not surprising that they haven't been used much yet.
The concern everyone has is that if interest rates go up, they may need to be used more often.
What we need to do now is try and ensure that borrowers and lenders communicate and manage the financial problems of short-term unemployment.
Do you think a possible change of government at the next general election will impact greatly upon the mortgage sector?
Obviously at this point where everyone is starting to electioneer, it is interesting to look at how the different parties would approach housing and mortgage market policy.
The big issue is the approach to regulation and the cumulative approach to managing banks going forward. The jury is out on how that will end up.
The second issue in relation to whoever is in government, is the amount of money they will have available for the housing and mortgage market to support homeowners or prospective homeowners, or to enhance social housing provision.
If they are unable to fund similar levels as in recent years, or if they are unable to provide debt advice because of the fiscal squeeze, the concern we have is that some of the benefits we have been able to achieve in the last two years may be lost.
But we recognise that they want the private sector to do more, yet the private sector's capacity is obviously limited in the current environment.
There are a number of things that we are looking at quite closely in terms of what the market conditions will be like. Once the manifestos are finally published we will say more.
What is the Council of Mortgage Lender's view on the Conservative Party's proposal to scrap the Financial Services Authority and make the Bank of England once again the regulator?
I think it is a concept which responds to the real criticism that the tripartite authorities failed in the initial stages of the banking crisis and the credit crunch.
I think it hasn't yet been fully fleshed out, but I read that George Osborne has a number of eminent advisers to help him to do that.
Our concerns are two-fold. One, if they move staff to the Bank of England, will this result in the FSA taking its eye off the ball in respect of ensuring an appropriate regulatory structure for financial services, particularly mortgages, during the transition period?
Secondly, will the introduction of a new Consumer Protection Agency reinforce what we already see as a problem, in that there are too many regulators?
One of the FSA's proposals on the mortgage market is to introduce secured lending within the FSA rather than the Office of Fair Trading.
We support that, because we support the concept of a single regulator. We aren't convinced that a Consumer Protection Agency separate to the FSA is the right way forward.
We are worried that the FSA moving into the Bank of England, in a hurried and ill-thought-through way, has real negative risk in terms of both regulatory and market impact.
It looks as though the Conservatives aren't going to rush ahead if they win the election, but we await further details.
