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Reelin’ in the Years – a reflection on three decades in the mortgage market


Published: 13 November 2015 | Author: Andy Gray, former CML deputy chairman

Andy Gray was deputy chairman of the Council of Mortgage Lenders, a post that he vacated when he decided to leave Barclays earlier this year. Here, he reflects in a personal capacity on what has changed and what has stayed the same during his long association with the mortgage industry.

I guess I am already showing my age by using a Steely Dan song title as the heading of this article. But it seems appropriate when I reflect back on almost 32 years working in the housing and mortgage markets – a truly significant period for all those associated with it, and for the wider economy.

It is always tempting fate when you utter a phrase like ‘never will we see a period like this again.’ But I do not think even Nostradamus could have predicted what has happened, and the likely challenges to come.


Back to the future

It is in vogue to create ‘word clouds’ to capture themes and trends. In the mortgage world, it almost seems to have been an endless barrage of change. From a position of what I would like to think of as maturity, this is just what I remember as I look back.

In my time, I have witnessed the rise and fall of the market (twice), the removal of first dual and then single mortgage interest relief at source (MIRAS), the removal of tax relief for low cost endowment mortgages, CAT standard, deferred interest and stabiliser mortgages, sub-prime, near-prime, buy-to-let, self cert and non-status loans, the UK joining and then exiting the exchange rate mechanism, mortgage rates at 15.75%, base rates at 0.5%, home information packs, green mortgages, lifetime trackers, the first fixed-rates and discounted rate mortgages (United Bank of Kuwait and Citibank), long-term fixed rates, covered bonds, mortgage indemnity guarantee insurance, Master Trust securitisations, synthetic securitisation, the mortgage rescue scheme, the Right to Buy, Help to Buy and so on. Closer to home for me, Barclays has made its own contributions to the market, launching the first flexible mortgage on the high street, the first high street offset loan, Switch & Save, Great Escape, the home-owner app, the first 10-year fixed rate under 3% and Family Springboard.

A rose tinted view?

I am not sure anyone would have seen these changes coming but I have no doubt that, as we move forward, the pace of change will become faster still, and no less relentless.

Looking backwards, it can be tempting to lapse into a comfortable, rose tinted view. I have often heard people waiting for the return of the good old or halcyon days of the mid-noughties. Well, quite frankly, history and the impact on many customers have demonstrated that that is not the place we need to get to. Rather, it is sustainable and consistent growth that is needed.

Of course, certain elements of the mortgage market have changed out of all recognition. One example is regulation, especially when applied through the customer/conduct risk lens. From nothing, to the CML’s Mortgage Code, to mortgage conduct of business (MCOB) rules in 2004 and more recently to the mortgage market review (MMR) in 2014. The rise and rise of regulation has seen a progressive layering of more and more resource. And, it is fair to say, each one of these changes was greeted with shrill voices concerned that the effect would be to stifle the market. Yet, history has shown that they have not. Although the resource drain is a real one, these regulatory steps have been for the right reasons; we should all step up, as individuals and collectively as an industry, to ensure good customer outcomes.

I have heard people wanting the return of the 'good old days' but, frankly, that's not where we need to be

But, at the same time, there needs to be balance to ensure a healthy, growing market, with policymakers and regulators working together with lenders and those planning and creating the housing stock. With the implementation of the European mortgage credit directive shortly upon us, we have mercifully in the UK already undertaken the necessarily major shifts involved through the MMR. The sensible national regulatory approach means the impact should hopefully be muted. With this in mind, a period of regulatory stability would be welcome, to ensure the action taken to date is embedded and its effect are well understood.

One area where we do need a sensible industry-led approach is in buy-to-let. Whilst diversity of approach is positive within a market, it is clear to me that, given such a strong and buoyant segment, the time is right to embrace a review of controls and customer outcomes to ensure we enjoy an enduring and stable element within the overall housing supply, learning from the lessons we have seen over the last few decades.

A perennial problem

One enduring theme that has remained an unsolved challenge throughout my time is having the right housing supply for an ever-changing UK population, the majority of which is still committed to the concept of home-ownership. Housing remains the biggest challenge for government, policymakers, regulators, builders, lenders and most importantly the customer. Looking at the historic trend is enlightening. In 1984, the total number of housing starts in the UK was 233,000. By 2000, this had fallen to 193,000 before rising in 2007 to 222,000. In 2014, the number was 160,000 – up year-on-year, but still too low. And to illustrate the long term nature of this problem, in 1974 the equivalent number was 338,000 – more than double the number of homes we are building today.

There is a generation facing the challenge of getting on any form of affordable housing ladder. Theirs will be a growing voice

Unless the stock and availability issue is addressed, we will have a perennial problem. My own 22-year-old son, gainfully employed in his first job post-university, is clearly part of the generation facing the challenge of getting on any form of an affordable housing ladder, and is acutely aware of how policy and politics need to address this, helping him access affordable housing, including rents. Theirs will be a growing voice.

Looking to the future, of one thing I am certain: that mortgage lenders will be represented by simply the best representative trade body in financial services – the CML.  Having been part of executive and chairman’s committee for a number of years, I have seen at first hand the value that the CML provides to its members and to wider stakeholders. It is hugely influential and highly respected, with Paul and the team playing a key role in shaping our future. But it also needs active member engagement, and support going forward.

So, back to Steely Dan. What has this got to do with today? It’s a simple parallel that I draw, that the past can influence today and the future. In today’s world of hip hop, rap and dance music, one of the most sampled artists is – you’ve guessed it – Steely Dan. It highlights that the experience of the past creates a foundation for the future, and that is equally true in mortgage lending, which will remain one of the most exciting segments of financial services, given the enduring desire for people to own their own homes. What we do really does matter to everyday life in the UK today.