December 2014

HML has received three ratings upgrades from Fitch

The Chancellor of the Exchequer announced stamp duty

reform during the Autumn Statement

Santander and TSB have launched ten-year fixed-rate

mortgages

HML News

HML has received three

ratings upgrades from Fitch

in its latest round of

evaluation.

UK Ratings

HML has had its UK Special Servicer Rating

upgraded from RSS2 to RSS2+. This means it

now has the joint highest Special Servicer

Rating in the UK.

Fitch also affirmed HML‟s UK Primary (Prime)

Servicing Rating and its UK Primary (Sub-

prime) Servicer Rating both at RPS1-. HML‟s

RPS1- Primary (Prime) servicer rating remains

the highest of any third-party mortgage

administration company in the UK and Ireland.

Its RPS1- Primary (Sub-prime) rating remains

the highest in Europe.

Ireland Ratings

HML also received two ratings upgrades for

Ireland. Both its Ireland Primary (Prime)

Servicer Rating and its Ireland Primary (Sub-

prime) Servicer Ratings have been upgraded

to RPS2+ from RPS2. These two ratings are

the highest of any servicer in Ireland.

Fitch also assigned HML a new Ireland

Special Servicer Rating assigned at RSS2.

Pole Position

Andrew Jones, chief executive

officer of HML, said: “I am delighted that

HML has received three ratings upgrades from

Fitch, as well as being assigned a new Ireland

Special Servicer Rating and being affirmed for

two more UK ratings.

“The Fitch press release noted HML‟s

excellent risk management framework,

commitment to staff development and strong

technology platform.

“In addition, the rating agency said that our UK

Special Servicer Rating was upgraded as a

result of our strong infrastructure, in particular

our proactive management of impaired and

high-risk loans.

“This is testament to our use of advanced

analytics to help shape and deliver our clients‟

arrears and debt management strategies, for

which we have won industry awards.

“We believe HML has achieved a milestone in

that, to the best of our knowledge, no other

mortgage administration company has ever

been given a new Ireland Special Servicing

Rating at the RSS2 or above level. This,

combined with S&P recently assigning us a new

Irish Special Servicing Ranking at Above

Average, places us in pole position to build

upon our standing in the market as the UK and

Ireland‟s leading third-party mortgage

administration company.”

The Fitch press release also noted that HML‟s

new parent, Computershare, will provide

infrastructure and operational support. The

Financial Conduct Authority approved the

purchase of HML by global financial services

company Computershare in November and the

acquisition was been completed on November

17th.

HML News

The Building Societies

Association‟s Robert Thickett

provides his thoughts on the

stamp duty reform – and why

more action is needed.

The big shock at the chancellor George

Osborne‟s Autumn Statement was, of course, the

government‟s decision to reform stamp duty land

tax.

At the stroke of midnight on the day of the Autumn

Statement, Wednesday 3rd December, the

government replaced the slab structure of the

previous system, (where whatever tax band your

property fell in was applied to the whole price)

and replaced it with a progressive system

charged like income tax.

The reform

Stamp duty has been a controversial and lucrative

means for UK authorities to raise funds since its

inception. It was first introduced in England under

the co-regency of William and Mary in 1694 as a

means of funding their war against France, and

the money has kept rolling in since then.

Stamp duty land tax replaced stamp duty in 2003

as a self-assessed transfer tax charged on land

transactions.

Because of the slab structure of the tax, whereby

the result of paying even £1 over a threshold limit

means a buyer is faced with a tax bill thousands

of pounds higher, many buyers and sellers have

deliberately tried to avoid it by any means

necessary, artificially impacting house prices as a

result.

All that has gone now and will be a boon for first-

time buyers and anyone purchasing (or selling for

that matter) a property over and above the stamp

duty thresholds. For example, someone buying a

property in Leeds where the average property

price is around £130,000 will now pay £100

compared to the £1,300 they would have had to

cough up under the old system, a massive 92%

less.

It‟s less attractive for someone buying a property

in the £1 million plus bracket. Someone buying a

£1.6 million property will now have to pay

£105,750 compared to £80,000 under the old

system.

Unsurprisingly there have already been reports in

the capital of purchasers doing everything they

can to avoid paying these increased stamp

duty bills with the return of gazundering (the thrifty

sister of excessive gazumping and indecisive

gazanging) whereby purchasers demand a

reduction in the price of a property.

Continued over the page

HML News

The real problem remains

But while the change to stamp duty is a

welcome if not overdue amendment (the

Building Societies Association has been

calling on the tax to be reformed for years) it‟s

still just another demand-based incentive.

What we desperately need is a boost in the

supply of housing, something that we have still

failed to see materialise in any significant

capacity.

Research by Cambridge Centre for Housing &

Planning Research estimates that we need to

be building around 245,000 additional

properties a year to satisfy demand and we‟re

not even close. Last year there were just

108,000 completions, one of the lowest house

building rates since 1923. So far this year

completions are 8% up and new starts 17% up

but it‟s still nowhere near enough.

There are glimmers of light. The proposed new

town of Northstowe in Cambridgeshire, with

capacity for 10,000 properties, has been stuck

in development hell since 2007. So as part of

the 2014 National Infrastructure Plan, the

government announced that it will trial a new

delivery model on the site, with the Homes and

Communities Agency taking the lead on

delivering it up to twice as fast as conventional

development routes.

Then there is the Starter Homes Scheme

aimed at spurring building on under-used

or unviable brownfield sites and bringing

100,000 starter homes to market at 20%

of the open market price.

And the government is also pushing

ahead with Custom Build - 11 Vanguard

councils are already using government

cash to boost this sector and the

government is consulting on how more

people can be helped to realise their

dream of building their own home.

In isolation all of these measures are, of

course, nowhere near enough. But it‟s

only by boosting custom build, shared

ownership, offsite building, social

housing, the private rented sector and

making the supply of new housing a key

priority that we will start to hit the sort of

completion numbers we need for the

UK‟s growing population.

Disclaimer: The views expressed in this

blog are Robert Thickett’s and do not

necessarily reflect those of HML.

HML News

HML signs five-year

contracts with Skipton

Group Lenders Amber

Homeloans and North

Yorkshire Mortgages.

The Skipton-headquartered business has

worked with Amber Homeloans and North

Yorkshire Mortgages for several years. It has

worked with Amber Homeloans since it began

lending in 2000 and with North Yorkshire

Mortgages since 2010, following the merger of

the Scarborough and Skipton Building

Societies in 2009.

The new contract will take effect from January

2015.

Andrew Jones, chief executive

officer at HML, said: “It is fantastic news

that we have signed new contracts with Amber

Homeloans and North Yorkshire Mortgages.

Both lenders are valued and long-standing

clients of HML and the signing of these new

contracts shows all parties‟ commitment to

continuing this collaborative relationship.

“All three companies put appropriate outcomes

for customers at the centre of everything we

do and this is an integral part of our

relationship.”

David Harvey, director of specialist

lending at Skipton Group said: “I am

delighted that HML, Amber Homeloans and

North Yorkshire Mortgages will continue to

work together to build on our successes for

another five years. HML is a key supplier and

plays an important role in supporting both

lenders to maximise the value of their

mortgage portfolios whilst always ensuring the

appropriate outcomes for customers."

HML is celebrating ten years

of servicing the mortgage

portfolios of Redstone.

HML and Redstone have worked together

since the lender was established in 2004.

Andrew Jones, chief executive

officer of HML, said: “I am delighted that

HML and Redstone are celebrating a ten-year

partnership and this milestone continues the

longstanding relationship that the two

organisations enjoy.

“Redstone is a valued and longstanding client.

We are fully committed to our partnership and

look forward to continuing to work together.”

David Lautier, managing director at

Redstone, said: “HML has been central to

Redstone‟s mortgage operations in the UK for

a decade and I am delighted that we have

reached the ten-year milestone.

“I look forward to continuing our collaborative

and strong relationship with HML.”

Industry Statistics

*Date reflects what the statistic was during that period, rather than

when the statistic was published

NOV ‟14 OCT ‟14 SEP ‟14

Consumer Prices Index

1.0%

1.3% 1.2%

DEC ‟14 NOV ‟14 OCT ‟14

BoE Base Rate 0.5% 0.5% 0.5%

AUG-OCT „14 JUL-SEP „14 JUNE-AUG „14

Unemployment Rate (ONS) 6.0% 6.0% 6.0%

NOV „14 OCT „14 SEP „14

Halifax House Price Index Up 0.4% on OCT Down 0.4% on SEP Up 0.6% on AUG

Average price Average price Average price

£186,941 £186,135 £187,188

Gross Mortgage Lending (CML) NOV „14 OCT „14 SEP „14

Down 9% on OCT Up 5% on SEP Down 1% on AUG

£16.9 billion £19 billion £17.8 billion

Home Repossessions (CML) JULY-SEP ‟14 APR-JUNE ‟14 JAN-MAR ‟14

5,000 5,400 6,400

Industry Statistics

Consumer Prices Index

The CPI decreased by 0.3% on October to

1.0% in November. A decline in motor fuels

and air transport costs was a main contributor

to the slowdown of the inflation rate.

BoE Base Rate

The Bank of England kept the base rate at

0.5%, as well as the stock of asset purchases

at £375 billion.

Martin Weale and Ian McCafferty once again

split the MPC 7-2 and wanted to increase the

base rate by 25 basis points.

Halifax House Price Index

The average price of a home increased by

0.4% between October and November to

£186,941. Values in November were 8.2%

higher than the same month in 2013.

Housing economist at Halifax Martin

Ellis said: “Receding buyer interest

combined with a revival in private housing

completions has brought supply and

demand into better balance. These factors

have in turn contributed to the easing in house

price growth since the summer.

“But housing demand continues to be

supported by a strengthening economy, rising

employment levels, still low mortgage rates

and the first gain in „real‟ earnings for several

years. We expect a further moderation in

house price growth over the next year with

prices nationally expected to increase in a

range of 3-5% in 2015.”

Unemployment Rate

The unemployment rate for August to October

stood at 6%, representing 1.96 million people.

There were 30.80 million people in work, an

increase of 588,000 compared to a year earlier.

Gross Mortgage Lending

Gross mortgage lending stood at £16.9 billion in

November, 9% lower than October and the

same as November in 2013.

CML economist Mohammad Jamei

said: “Current activity in the housing market

has eased with transactions back down to levels

seen almost a year ago.

"The reform in stamp duty is likely to provide a

modest short-term boost in activity over the next

few months, but its impact will fade away in the

medium term."

Home Repossessions

Repossessions declined to 5,000 for Q3 2014,

down from 5,400 during the previous three-

month period, the CML revealed.

This is the lowest number since quarterly

records began in 2008.

Paul Smee, director-general of the

CML, said: “Encouragingly, recent research

also suggests that many households are

preparing themselves for the prospect of higher

interest rates, so we expect any uptick in

payment difficulties to be relatively muted if and

when rates do begin rising.

Top News Stories

.

Santander and TSB have

launched ten-year fixed

mortgages.

In the run-up to Christmas, Santander

announced a ten-year fixed mortgage with

monthly payments at 3.44%, which it described

as its “lowest-ever”. The mortgage comes with a

£995 fee and up to 60% LTV.

Santander UK‟s managing director of

mortgages Miguel Sard said: "With the

launch of our new ten-year fix we are widening

our range of mortgage options on offer. Whether

you want the security of a ten-year fix, or simply

the reassurance of a shorter-term deal, we are

currently offering some of the lowest fixed rates

on the market."

On the same day, TSB also launched ten-year

fixed deals, with rates starting at 3.44%. The

lender‟s products do not have application or

product fees and customers are able to exit the

deal or refinance without having to hand over an

early repayment charge.

During Q3, 82.6% of new home loans were at a

fixed rate, up from 82% in Q2 and 77.3%

compared to the same quarter last year.

The figures published by the BofE and Financial

Conduct Authority revealed that the proportion

of borrowers who have chosen to fix has grown

for the eighth quarter in a row.

Head of lending at the Mortgage

Advice Bureau Brian Murphy

commented: “Lenders are currently tripping

over themselves to win business, with many of

the major providers locked into a mortgage rate

war.”

New research from Which? Money Compare

has also noted an increase in popularity of

longer fixed-rate deals.

Over three-quarters of individuals between

September and November 2014 who filtered

mortgage results on the comparison website

requested to view fixed-rate deals. Just 2%

asked to see discount variable rate deals and

11% wanted to look at tracker mortgages.

In mid-December, there were 1,505 two-year

fixed-rate deals on the market and 976 five-year

fixed-rate offers.

According to Which? Money Compare, the

lowest rate at the time was a Post Office 60%

LTV 1.37% fixed-rate mortgage. HSBC offered

a 2.48% five-year deal.

The FCA will increase its

regulation remit from April 1st

2015.

The regulator will oversee seven extra major

financial benchmarks in the currency,

commodity and fixed income markets following

recommendations from the Fair and Effective

Markets Review.

Five banks were given combined fines of almost

£2 billion for significant failings in foreign

exchange trading, in November of this year.

Martin Wheatley, FCA chief executive,

said the new regulation will “preserve the UK‟s

reputation as a centre for excellence for

financial services”.

Top News Stories

November retail sales were

at their highest level for 5

years.

This is according to figures from the British

Retail Consortium, which noted that „Black

Friday‟ supported the growth. Total sales in

November were up by 2.2%.

Helen Dickinson, Director General,

British Retail Consortium, said: "November's retail sales demonstrate continued

growth in sales across the board compared to

last month. The huge demand for bargain TV's

and other household appliances on Black

Friday, whether for personal use or as presents,

meant that electricals were the stand out

category in terms of sales growth.”

The UK‟s banking system

could double in size by 2050.

A new report published by the Bank of England

has suggested that it could double from its

current size to account for over 950% of the

UK‟s GDP.

This growth would surpass other banking

systems in the G20 and would result in banking

assets standing at approximately £60 trillion.

When looking at whether there was a link

between large banking systems and banking

crises, the findings showed that countries that

avoided systemic issues, along with higher

market-based leverage ratios, did tend to have

“significantly smaller banking systems”.

Just 4% of mortgage holders

would need to take action if

the base rate rose to 2.5%.

This is according to research carried out on

behalf of the Bank of England (BofE), although

it is based on the assumption that household

incomes will rise by 10%.

A 2% interest rate rise would push high

mortgage debt households up from 1.3% to

1.8%, with mortgage holders aged between 25

and 44 expected to be the worst affected.

The BofE report also noted that average annual

household pre-tax income stands at £33,000,

with typical mortgage debt £83,000 and average

unsecured debt £8,000.

While the majority of households with

mortgages would be able to manage a 2% base

rate rise, 360,000 households currently find it

difficult to pay their home loans and face

arrears. This would rise to 480,000 households

in light of a 2% increase, the Bank noted.

The BofE report noted: “As usual, raising

interest rates will have significant distributional

consequences. It will make borrowers worse off

and savers better off, holding other factors

constant. On average, younger households,

who are more likely to be borrowers, will be

worse off, while older households, who are

more likely to be savers, will gain.”

The survey also found that 60% of borrowers

would cut back on expenditure as a result of

higher interest rates. On the other hand, only

10% of savers would increase spending.