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


Vision of the Future

• Content– Regulation

– e-commerce

– Niche Lending


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


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


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


Mortgage Regulation

Has Mortgage regulation achieved these objectives?


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


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


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


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


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 Future

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


The Future

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


E - Commerce


E - commerce business levels

Business Submitted Online

9%

17%19% 20% 19%

14%

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


Online Growth

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


Niche Lending


Niche Lending - Current

Intermediaries think niche lending is:

Extremely / very important 45%Quite important 35%

____

“Important” 80%


Niche Lending - Future

Intermediaries think:

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


Niche lending - Products

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


Niche Markets - Growth

Growth of Individual markets:

Equity Release +6% pa

Self Cert +5% pa

Sub prime +5% pa

Buy to Let +3% pa


Niche Lending - Importance

Importance of Individual Markets

42%

48%

60%

60%

Buy to Let

Sub Prime

Self Cert

Buy to Let

Importance


Niche Markets - Conclusion

Equity Release will become a major market

Self Cert will remain important

Buy to Let much less important


Q & A’s

End

and

Thank you

Documents

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