annual report contents chairman’s conveyancing 4 introduction 18 and fraud director general’s mortgage funding 5 overview 19 2010: a record of the funding and the 6-7 year in numbers 20-21 rental sector mortgage market the media 8-9 review 22-23 environment mortgage regulation: the political 10-11 debate is launched 24-25 developments other regulatory adding value for 12-13 issues 26-27 members and associates market research, strategy and 14-15 commentary and data 28-29 finances 16-17 arrears and possessions 30 members and associates chairman’s introduction Colin Walsh This uncertain outlook requires us all and support the long-term health of I am pleased to to act together, making a concerted the UK economy. We need committed, present the CML effort to set the right direction. We financially sound lenders providing must be focused on creating a long reliable products, which are dependable annual report for term, sustainable UK housing market, and adapt to the circumstances. Lenders so people in this country can continue must continue to embrace product 2010, a year in to realise their aspiration of home- innovation. Lastly, we need a sound which the industry ownership. But there must also be house-building and development choices for those for whom home- industry, financially structured and continued to ownership is not a realistic tenure, and supported to ride through the peaks lenders want to continue to help fund and troughs of the economic cycles. stabilise, but at the the private and social rented sectors, too. end of which there As the trusted voice of the industry, It is clear that house price movements the CML is in a unique position to were still many affect people in the housing market in work with the four key parties - and different ways. While the direction of with other stakeholders - to create an challenges to price movements is viewed according environment encouraging a long-term be overcome. to where you are in the market, the sustainable housing market. We will underlying driver – the imbalance continue to work tirelessly to represent between basic demand and supply – the industry and deliver the holy grail – means the fundamental problem remains a sustainable housing market. We must unresolved and is likely to worsen until now make the most of this opportunity mortgage lending and annual house- to set and deliver this direction of travel. building reaches a higher, sustained level In getting us this far and ensuring we to address these imbalances. successfully navigated through the challenges of the past two years, I would The challenges to the group of house like to thank my predecessor, Matthew purchasers key to the long-term health Wyles, for his leadership and dedication. of the market – first-time buyers – This year will also mark another remain. But their difficulties are not significant change in the leadership of unique. Recent research into second the CML, with Michael Coogan moving steppers – those making their first to pursue new challenges. move up the housing ladder – has revealed a set of problems which can Since 1996, Michael has been the limit their options, too. director general, leading the CML To deliver this long-term through boom and recession, while sustainability we need the four key providing a highly effective mouthpiece parties – government, regulators, for articulating and promoting industry lenders and house-builders – to views with great effect. I wish to thank work together. Michael in particular, but also the entire We need the government to team at CML, for the outstanding work give clear policy direction, they have done on behalf of our industry. carried out consistently with well thought through policies to avoid unintended consequences. We need regulation which is proportionate and appropriate to the current market circumstances. It must dovetail with government policy 4 director general’s Michael Coogan overview It is with mixed feelings that I pen my final contribution to a CML annual report, as I look forward to standing down from my role after nearly 15 years. I hope you will forgive me for mentioning The CML has a high-performing team the FSA was not listening to us, as it one or two keynote events. After taking in place, ready for the challenges of the adopted its new conduct risk strategy. So, on my role, the CML took a lead in future. Although I have been the CML’s we implemented a “hearts and minds” introducing regulation with a mortgage figurehead, I would be the first to say campaign, backed by market data and code for lenders and intermediaries. that our reputation is driven by this team consumer research to show that the FSA Many in the industry still miss the which, at all levels, has been exemplary needed to re-think. In speeches in 2010, Mortgage Code Compliance Board, and and has performed exceptionally. I talked about “the end of the golden believe its cost-benefit value was more age of home-ownership,” and “fatally clearly demonstrable than the Financial In 2010, recognising that a problem flawed” FSA proposals. Sometimes, I was Services Authority’s (FSA) today. shared is a problem halved, we have described as creating heat, but we have worked with organisations as diverse inspired the public debate that Adair More than 10 years ago, the CML sought as the Association of Mortgage Turner asked for last year. to build a partnership with government in Intermediaries, the Law Society, the support of sustainable home-ownership. Home Builders Federation, Shelter, As 2011 progresses, it is helpful to know Now, with fresh uncertainty about arrears Citizens Advice and the Financial Services that Hector Sants has described the MMR and possessions, our understanding of Consumer Panel. Working together, we as being at a stage of “analysis”, and that final the issues and risks are substantially can deliver better market outcomes – a rules will not be implemented this year. better than in the early 1990s. We constant message to government and cannot be complacent about government regulators as well. I can now move on to other challenges, commitment to the safety net, and the no doubt still taking a close interest in regulators are increasing prudential Within the organisation, there has been the mortgage market, confident that the pressures. Unfinished business. a major re-vamp. This year, we have excellent CML staff, with my successor, updated our constitution and developed will take the organisation from strength It is with particular pride that I recall a new three-year plan and budget up to to strength. recognition for the CML externally. 2014. Perhaps the highlight was the Trade Thank you for your personal support Association Forum’s association of the We have revitalised our engagement with over the years, and your support for the year award in 2004. members, who are more aware of policy CML in 2010. developments, help formulate policy, and I have also prided myself, and my are fully ‘in the loop’ in a fast-changing colleagues at the CML, for being prepared environment. to explain the inexplicable, but never to defend the indefensible. This has We have continued to identify areas never been more necessary than in the where thought leadership is necessary to period since 2007, when media interest take the industry forward. intensified. But the highlight, personally, in 2010 We have left behind that period of was leading on the mortgage market instability, as an industry and organisationally. review (MMR). It was clear to me that 5 2010: a record of the year in numbers Gross mortgage lending (monthly, seasonally adjusted) Net mortgage lending (monthly, seasonally adjusted) Lending for house purchase (monthly) Average first-time buyer deposits Tenure distribution House prices 6 Net mortgage lending (monthly, seasonally adjusted) Gross lending by borrower (monthly) Average first-time buyer deposits First-time buyer composition House prices Mortgage possessions, previous vs. current downturn 7 mortgage market review The FSA has been reviewing the mortgage conduct of business rules since soon after their introduction in 2004. After the crisis, this was re- focused as the wide-ranging mortgage market review (MMR). Since its launch, the MMR has been requirements, a firm must determine • lenders should assess affordability a key policy priority, and we have that a mortgage is affordable. The FSA on the basis of a maximum 25-year continued to represent the views of all defined an affordable mortgage as one term, even if the borrower types of lender. allowing the consumer: proposes to take out a longer term loan, which would reduce At the outset, the FSA set clear “to meet current and future payment the monthly payments; and objectives for the review: to deliver obligations in full without recourse to • lenders should stress test the loan “a sustainable mortgage market for all further debt relief or re-scheduling, avoiding accumulation of arrears while against potential interest rate rises. participants,” and one that is “flexible allowing an acceptable level for consumers.” We support these of consumption.” We were also concerned about the broad objectives. We also agree with cumulative impact of these measures, the FSA’s view that the MMR’s scope At face value, this may sound sensible. which would create layers of protection should include the impact of prudential But it burdens the lender with the but restrict access to lending to regulation, conduct of business and impossible task of judging ability to make significant numbers of new and existing fighting financial crime. payments throughout the term of borrowers. This exclusion would be the mortgage. exacerbated by the caution of lenders, We also agree with many of the more given the additional regulatory risks they would face in complying with the detailed objectives of the review, In proposing how rules could be drafted proposed new rules.