In my last blog I highlighted the emergence of a new niche lender and wistfully hoped that proper competition would return to the mortgage lending market. The powers that be at mutuals up and down the country must have been reading intently as the latest data shows that building societies are currently enjoying their largest market share in well over a decade. While this renaissance means they now account for more than a fifth of gross mortgage lending, the headline statistics are even more impressive with building societies now accounting for 33 out of the top 40 best buy fixed, variable and buy-to-let deals showing they are well and truly punching above their weight.
The Funding for Lending update published by the Bank of England also shows that building societies are also making far greater use of funds drawn down from the scheme. While their larger bank counterparts appear to be using the money to satisfy capital adequacy requirements, mutuals are passing the money on to borrowers and helping to get first-time buyers on the property ladder. Building societies, to a very great extent, remain the cornerstone of mortgage lending in this country and were here before – and many would say they will be here long after – some of the more recently established lenders. New entrants are always welcome, but the reliability provided by building societies is also much needed.
Another recent development that caught my eye was the rumours that the Prudential is to become the first UK institutional investor to enter the private rented sector. The move would see the Pru’s asset management arm buy hundreds of homes from the Berkeley Group and could lead the way for other institutions to become landlords as an alternative to – or extension of – the existing crop of property investors. Leaving aside personal opinion of the proposals, it is encouraging to see institutions being proactive to address the UK’s property supply shortage and the money earmarked in the Budget for the Build to Rent scheme shows a State willingness to tackle the problem too.
Which brings us on to the main draw of the Budget and the two-pronged Help to Buy mortgage guarantee. Given that the scheme is likely to undergo many tweaks before its 2014 implementation, if the wave of industry feedback is anything to go by, it’s pointless forming too strong an opinion about its current incarnation, but I will say that I think it’s a positive development for the mortgage industry if executed properly.
It will have to be monitored properly to ensure that it doesn’t create a property price bubble or go the same way as the American state-backed providers Fannie Mae and Freddie Mac – and I’m not entirely comfortable about the taxpayer being potentially exposed to liability when we already have a private mortgage insurance industry that can absorb any such losses – but anything that can unblock the first-time buyer logjam is to be applauded. If lenders get onside with the initiative (and hopefully brokers will be incorporated in the final shakedown too) then it could be just the tonic the market needs as long as a prudent lending framework is adhered to. It can be all too easy to focus on the negatives of any new initiative but the Help to Buy scheme – and the aforementioned developments – shows there is plenty to be positive about at present.
