The Mortgage Event 2005 The Mortgage Event Vision of the Future Tim Dawson Chairman IMLA

The Mortgage Event 2005

The Mortgage Event

Vision of the Future

Tim DawsonChairman IMLA

The Mortgage Event 2005

Vision of the Future

• Content– Regulation

– e-commerce

– Niche Lending

The Mortgage Event 2005

Role of FSAThe FSA has four statutory objectives:

market confidence: maintaining confidence in the financial system;

public awareness: promoting public understanding of the financial system;

consumer protection: securing the appropriate degree of protection for consumers; and

the reduction of financial crime: reducing the extent to which it is possible for a business to be used for a purpose connected with financial crime.

With the aim: To promote efficient, orderly and fair markets and to help retail

consumers achieve a fair deal.

Source: FSA Website - What we do

The Mortgage Event 2005

Objectives of Mortgage Regulation

To enhance consumer protection in two key ways:

1. Improvements to information about mortgages made available to borrowers, achieved through:

– rules on financial promotions, designed to create high standards in product transparency

– pre and post sale disclosure documents, to enable consumers to acquire clear information specific to their circumstances and in a standard comparable format

– provision of comparative information and consumer education to help in the early stages of shopping around, and to raise understanding of mortgage products

– measures to improve information provided to those facing arrears and repossession

Source: FSA website - Mortgage Regulation

The Mortgage Event 2005

Objectives of Mortgage Regulation (2)

2. Mortgage lenders need to be authorised by the FSA and to meet the following high level standards:

– Threshold Conditions set out in the Financial Services and Markets Act (FSMA)

– senior management responsibilities

– systems and controls

Source: FSA website - Mortgage Regulation

The Mortgage Event 2005

Mortgage Regulation

Has Mortgage regulation achieved these objectives?

The Mortgage Event 2005

Cost Effective ?

40% of Intermediaries costs increased by 10% 21% of Intermediaries costs increased by 20% Costs to implement MCOB £200m MCOB annual running costs £75m - £150m

The Mortgage Event 2005

Better Decision Making ?

86% IMLA members think KFI not helped or made little difference.

60% Intermediaries think clients don’t understand KFI

70% Intermediaries don’t think clients use KFI’s to compare products

The Mortgage Event 2005

Better Decision making ?

68% of Intermediaries don’t believe clients get better advice post Mortgage Regulation

72% of Intermediaries don’t believe clients benefit from Mortgage Regulation

The Mortgage Event 2005

Objectives of Mortgage RegulationImprovements to information about mortgages made

available to borrowers, achieved through:

– Financial promotions ?

– Enable consumers to acquire clear information specific to their circumstances and in a standard comparable format ?

– Help consumers shop around NO

– Improve information provided to those facing arrears and repossession ?

• Cost effective NO

The Mortgage Event 2005

MCOB Impact on Market Structure

• More DR’s than expected

• Few networks disappeared

• Shortage of AR’s

• No clear sign of market shake out yet

The Mortgage Event 2005

The Future

• FSA Plans:– Cost benefit review - 2006– Review of KFI - 2006– TCF

The Mortgage Event 2005

The Future

• What the market would like:– Review of MCOB– Simplify regulation– Reduce cost– Involve / work with the industry

The Mortgage Event 2005

E - Commerce

The Mortgage Event 2005

E - commerce business levels

Business Submitted Online

9%

17%19% 20% 19%

14%

0% 0%-10% 10%-25% 25%-50% 50%-75% 75%-100%

The Mortgage Event 2005

Online Growth

Average online business:Now 38%In one year 47%In 5 years 80% ?

The Mortgage Event 2005

Niche Lending

The Mortgage Event 2005

Niche Lending - Current

Intermediaries think niche lending is:

Extremely / very important 45%Quite important 35%

____

“Important” 80%

The Mortgage Event 2005

Niche Lending - Future

Intermediaries think:

Much / a little more important 64%Less important 3%

The Mortgage Event 2005

Niche lending - Products

Current importance of individual markets:Self Cert 21%Buy to Let 13%Sub prime 11%100% 6%Equity Release 6%

The Mortgage Event 2005

Niche Markets - Growth

Growth of Individual markets:

Equity Release +6% pa

Self Cert +5% pa

Sub prime +5% pa

Buy to Let +3% pa

The Mortgage Event 2005

Niche Lending - Importance

Importance of Individual Markets

42%

48%

60%

60%

Buy to Let

Sub Prime

Self Cert

Buy to Let

Importance

The Mortgage Event 2005

Niche Markets - Conclusion

Equity Release will become a major market

Self Cert will remain important

Buy to Let much less important

The Mortgage Event 2005

Q & A’s

End

and

Thank you