Each January brings with it a wealth of column inches populated with resolutions and predictions for the coming year. While resolutions are something consigned to the past as I cannot bear the failure, I am more than happy to make the odd prediction and will even go so far as to offer the odd suggestion for lenders, the FSA and the government.
At John Charcol, we firmly believe the increased activity in the housing market apparent in the second half of 2005 will continue into 2006. Confidence is clearly back in the market at present. Therefore, as a comparison to this time last year, the first half of 2006 should show a marked improvement. I anticipate a good year with gross lending to improve on 2005 and perhaps return to 2004’s level of near £290 billion.
The Bank of England Base Rate is much debated at present. I expect to see Base Rate fall to at least 4.25 per cent and probably a step further to 4 per cent. Two cuts of 0.25 per cent over the year should keep the market ticking over nicely without over-stimulating demand.
High-profile entrants
The lender arena is also going to be busy this year. You would have to have had your head in the sand if you were not aware of some high-profile entrants due this year. The more the merrier. The market may be crowded but with good quality broking, consumers will benefit. More competition means more competitive products.
What I would like to see is lenders address a couple of issues that fall under ‘Treating Customers Fairly’ (TCF). Number one is the much maligned exit fee. These fees have increased so much and, in many cases, become so large they are just another lender income stream. A retention tool by any other name.
When we look at the percentage increases, the figures are staggering. At a time when lenders’ costs are reducing as a result of electronically-held deeds at the Land Registry, it seems ridiculous they can increase a deeds-release fee. The variable nature of an exit fee is the real bone of contention. How can a broker, or indeed consumer, be confident in their research when the goalposts can move at any time? For someone to fix an exit fee at a reasonable level for the term of a loan would be a major PR coup. Northern Rock fix it but £250 is steep.
Footprints
Lenders also need to comply with the FSA’s requirement to not inhibit shopping around. A few do but most do not. It is unacceptable for lenders to risk ruining a potential customer’s credit score by leaving a footprint when only a DIP has been asked for. The FSA should take urgent action to force lenders to offer quotation searches as these do not leave a muddy great footprint.
While I mention the FSA, I strongly believe that to ensure most Financial Promotions are not misleading, the requirement to highlight the APR, or overall cost for comparison, should be changed for all loans not based on a competitive lifetime rate. For these products, the APR does provide a helpful comparison but it is not right for the rest of the market. A system is needed that allows comparison over a more meaningful period of time, based on how long people keep a loan for.
HIPs to go?
My final wish is for Home Information Packs (HIPs) to be canned. After the Chancellor’s SIPPs u-turn there is still hope the government will see sense and cancel HIPs as a compulsory requirement. Despite delaying the start date from 1 January to 1 June 2007 it still looks unlikely there will be sufficient qualified inspectors by that date, even though the level of training required is far lower than for a chartered surveyor. This will force a further delay and the closer we get to a General Election the less likely the government will be prepared to risk the voters’ wrath by inflicting this extra cost of selling a property. With e-commerce increasingly becoming part of the house-buying process HIPs are yesterday’s solution to yesterday’s problem. Only time will tell though.
Drew Wotherspoon is head of communications at John Charcol
