MortgagesApr 16 2014

Mortgage market at risk of ‘drought’ after MMR: Paragon

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

Speaking in London last week at the HSBC housing market debate, the chief executive of mortgage provider Paragon warned that a “mortgage drought” could develop following the implementation of the MMR on 26 April.

He said: “Just like the RDR, the MMR will have a massive administrative effect on the market, and despite the preparations of the industry, there is a real risk of disruption to the application process.

“There is also a tail risk with the potential increase of interest rates, which could make affordability tests even worse, while Bank of England governor Mark Carney also has the power to tell the FCA to tighten affordability rules further.”

Mr Nigel Stockton also called for the Help to Buy loan limit to be reduced from £600,000 to £300,000. He added: “Ninety-three per cent of our Help to Buy business has been conducted outside these regions, particularly in the Manchester and northeast areas, and none has been over £300,000.”

While the onset of the MMR and its toughened lending criteria could damage consumer confidence, Mr Stockton, financial services director at property and financial services group Countrywide, said the Help to Buy mortgage guarantee scheme had “improved customer sentiment.”

HSBC head of mortgages Peter Docker and Mr Terrington both called for an orderly exit from the scheme.

Meanwhile, Mr Terrington said: “The scheme has proved useful as a short-term tool, and came about because the banks and building societies were not willing to do 95 per cent lending.”

Lack of supply concerns

Panel members said one of the biggest obstacles to stability in the property market was a failure to meet demand for new homes.

David Newnes, of LSL Property Services, said a lack of skilled labour and available land was holding back housebuilding, adding that “whatever the government is doing to speed, it is not working”, with planning applications still taking 12-18 months on average to process.

Nigel Terrington added that the importance of the role of housing minister should be reflected in its escalation to a cabinet position. He said: “You can’t have a long-term housing policy when you have had more housing ministers than Chelsea [football club] has had managers.

Adviser view

Andrew Montlake, director of London-based mortgage broker Coreco, said: “It is hard to know what will happen in terms of delays with the MMR, but people need to be more aware of the changes and that timescales could suffer. I also agree that Help to Buy has galvanised a lot of would-be buyers into action.”