July 2014

Penny Haslam, journalist and presenter, explains why having an opinion is essential in the mortgage sector

HML’s CIO Kim Brien has spoken exclusively to Silicon Republic about our IT strategy

Over 188,000 former UK mortgage holders could still owe money following repossession , with the average shortfall £43,000

HML News

HML is praised by journalist and presenter Penny Haslam for leading thought leadership within the mortgage market.

Her article can be read below.

Prepared to speak your mind? What a refreshing change, says journalist and presenter, Penny Haslam. These days, having a strong opinion on something is quite old fashioned. Finding someone to say what they mean, and mean what they say is a rarity. The fear of being seen as controversial is common. You only have to look at the countless numbers of folk on Twitter who are at pains to tell you their tweets are not those of their employer. Their views and opinions come from their very own minds (where else?). That’s just one social media channel. Imagine being asked to provide a quote for a national newspaper about repossession rates or talk about an interest rate rise on BBC Radio 5 Live. What would you say? Would you offer your personal thoughts, drawing on years of experience in the industry? Or would your comments tow the industry line and not offend the regulator? All too often as journalists we hear the same thing, the same lines trotted out about this, that and the other. What we are left with is bland and unnoticeable, tropes that don’t disrupt, cause discomfort or chasm. In my experience, industry experts tend to react, but it’s my opinion (!) that there’s room for much more thought leadership in the industry.  

In the absence of such leadership, or strong opinion or passion, we journalists are left to our own devices when translating shifts in the market. Interest-only mortgages are a ticking time bomb, right? I can imagine this is frustrating, especially when the shock headlines differ from the detail in the main body of the article or contradict the figures. Or when the live television interviewer uses them as shorthand in his or her questions. It then begins to sink into national consciousness and all of a sudden, yes, it’s true, we are preparing for another property crash! Influencing the zeitgeist shouldn’t be left to the media. Recently, I met some people from HML at their bright new offices in Skipton. They are knowledgeable, responsible and enthusiastic about their business. It’s exactly what you’d expect from a firm that successfully handles a not-to-be-sniffed-at amount of the country’s mortgage back office admin.  What I didn’t expect was that they’re happy to nail their colours to the mast. When it comes to mortgage industry topics du jour, they’ve got opinions. Maybe it’s because they’re from Yorkshire. Or maybe it’s because they feel it’s time to stick their heads above the parapet and start a conversation that will ultimately benefit and refresh the industry – and influence the wider view of mortgages, mortgage providers and products. 

Continued over the page

HML News  I have led on driving the organisation in

support of an agile IT approach, promoting a value-driven delivery approach. When change lands, I help to ensure that the business is ready; after all, the majority of cultural changes begin on the business side.

I always walk the floor and hot desk, as I much prefer to speak to different people rather than rely on emails and the phone. One of my mantras is “Go to the problem, don’t let it come to you.” In doing this, I take my experience to the location of the problem and discuss face-to-face with the relevant individuals to help solve the issues.

What are the main points of HML’s IT strategy?

Our IT strategy supports HML’s four key strategies; retain and add value to clients, acquire new clients, mobilise our people and manage our cost base. By constantly looking for ways to simplify our architecture we keep costs down. By creating software reuse we can expand the propositions without having to always build new systems from scratch. This is enabled by the agile approach, and ensures we only deliver the IT solutions that are required.

Our IT strategy mobilises our people by keeping them better connected, empowered and able to work smarter. We are considering moving to Microsoft Lync allowing better communications across the sites. Its leading features include instant messenger, video conferencing, Lync meetings and telephony.Our clients trust us to service their mortgage customers’ accounts effectively and right first time, improving the customer experience and enhancing our clients’ brands and reputation. If our IT did not enable us to do this, we would lose clients and struggle to attract new ones.

In my experience of coaching experts to perform brilliantly in front of others, be it on TV or radio, or doing presentations, most people are able to find a way to say what they mean, and mean what they say without upsetting the apple cart. And guess what, that’s far more engaging and illuminating than the same old comments.  It’s worth remembering there are plenty of outlets where you can ply your thought leadership, be it through social media, in a blog, or a video, or speaking at an industry event. Knowing your onions, and having opinions is a strength you can use to your advantage. And being bold can pay off. In January 2013, HML were commended by the regulator for being the only third-party mortgage administration firm to have presented it with plans to tackle the issue of interest-only mortgages. Apparently they’re not a ticking time bomb after all – who knew?!

Kim Brien has spoken exclusively to Silicon Republic about HML’s IT.

You can read the article in full here. Some of the main questions can be found below.

What are some of the main responsibilities of your own role, and how much of it is spent on deep technical issues compared to the management and business side?

I only get involved with deep technical issues when escalated. The majority of my time is spent on the management of the business, particularly focused on business change. I tend to drive initiatives that help to redefine HML’s platforms and ensure we maintain market-leading functionality.

HML News

Over 188,000 former UK mortgage holders could still owe money following repossession, with the average shortfall £43,000.

This is according to data from HML. The problem is the worst in Northern Ireland, where 97% of repossessions resulted in the property selling for less than the mortgage value. This is known as mortgage shortfall debt. The North and North-West take joint second place where mortgage shortfall debt is having the greatest impact, with 86% of repossessions having a shortfall. The region the least affected is the South-East, where 75% of repossessions are in shortfall.

There were around 227,500 repossessions between 2008 and 2013, with an estimated 188,501 in shortfall, representing 83% of the total repossessions. The average shortfall owed by former mortgage holders is £43,000.

Damian Riley, director of business intelligence at HML, said: “A borrower’s obligation towards their mortgage does not end with repossession, only when the debt has been repaid. Therefore, even though their home has been repossessed, they are still liable for any shortfall that exists. Providing lenders inform borrowers of their intentions to recover the debt within six years, the debt remains live on an open-ended basis.

“For those lenders that choose to recover mortgage shortfall debt, HML urges them to ensure borrower contact and collection delivers the most appropriate outcomes for individuals. It is not always the right course of action for an individual to be contacted for repayment, which is why lenders need to take a targeted approach, supported by advanced analytics and an experienced, skilled and empathic team. “Some debt collection companies tasked with collecting mortgage shortfall debt often simply work their way through a borrower list and contact each individual one by one. At HML, we do not believe this is good practice, as contacting certain borrowers will be neither in their or the lender’s best interests and may be frowned upon by the regulator.”  

Number of repossessions 2008-2013

Estimated number of 

shortfall cases

Estimated % of repossessions in 

shortfallE.Ang 19,895 15,518 78%E.Mids 13,602 11,426 84%Gr.Lon 22,307 17,176 77%N.Ire 18,994 18,424 97%N.West 26,718 22,977 86%North 16,475 14,169 86%S.East 23,238 17,429 75%S.West 13,106 10,223 78%Scot 14,992 12,593 84%W.Mids 23,515 19,282 82%Wales 17,105 14,539 85%Yorks&Humb 17,553 14,745 84%Total 227,500 188,501 83%

Industry Statistics

Consumer Prices Index

BoE Base Rate

Unemployment Rate (ONS)

Halifax House Price Index

Gross Mortgage Lending (CML)

Home Repossessions (CML)

JUNE ‘14

1.9%

JULY ‘14

0.5%

MAR-MAY ‘14

6.5%

JUNE ‘14

Down 0.6% on MAY

Average price

£183,462

JUNE ‘14

Up 4% on MAY

£17.5 billion

JAN-MARCH ‘14

6,400

MAY ‘14

1.5%

JUNE ‘14

0.5%

FEB-APRIL ‘14

6.6%

MAY ’14

Up 3.9% on APR

Average price

£184,464

MAY ‘14

Same on APR

£16.5 billion

OCT-DEC‘13

6,100

APRIL ‘14

1.8%

MAY ‘14

0.5%

JAN-MARCH ‘14

6.8%

APRIL ‘14

Down 0.2% on MAR

Average price

£177,648

APRIL ‘14

Up 8% on MAR

£16.6 billion

JULY-SEP ‘13

7,200

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

Industry StatisticsConsumer Prices Index

The CPI increased by 0.4% on May to 1.9% in June. The largest contribution to the CPI’s increase came from a rise in air transport, and clothing, food and non-alcoholic beverage costs. There were no large downward pressures to offset the change.

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.

Halifax House Price Index

The average price of a home decreased by 0.6% between May and June to £183,462.

This represents an annual increase of 8.8% from June 2013.

Commenting on the decrease, Stephen Noakes, mortgages director, said: "House prices in the three months to June were 2.3% higher than in the three months to March. Annually, prices were 8.8% higher in the three months to June than in the same three months last year.

“However, prices fell marginally during the month representing a fourth-monthly decline since last December. Housing demand continues to be supported by an economic recovery that is gathering pace, withemployment levels growing and rising consumer confidence, although real earnings growth remains sluggish."

Unemployment Rate

The unemployment rate for March to May stood at 6.5%, representing 2.12 million people. Compared to the previous year, the number of individuals in employment rose by 929,000. In addition, the number of unemployed people declined by 383,000 compared to a year earlier.

Gross mortgage lending

Gross mortgage lending stood at £17.5 billion in June, 4% up on May and 17% higher than the same month in 2013, when lending reached £14.9 billion.

CML chief economist Bob Pannell said: “The macro-prudential interventions announced by the Financial Policy Committee in late June are finely calibrated and precautionary, but could nevertheless reinforce April’s Mortgage Market Review in tipping the UK towards a more conservative lending environment.

"It is difficult to gauge the short-term direction for house purchase activity and mortgage lending more generally, given unknown regulatory impacts and uncertainty as to when the first in a series of interest rate increases will take place.”

Home Repossessions

Repossessions rose from 6,100 to 6,400 from Q4 2013 to Q1 2014, the CML has revealed. However, this represents a 20% decline on the same quarter in 2013.

Around 1.7% of homeowners had arrears of at least three months’ mortgage payments or more.

Top News Stories

.Interest rates cannot stay low for too long, Mark Carney has said.

Speaking at the Commonwealth Games business conference in Glasgow, the governor of the Bank of England said there was a risk of the UK returning to recession and experiencing a housing bubble if rates were left low for too long.

Mr Carney said: “The Bank is well aware that a prolonged period of historically low interest rates could encourage other risksto develop. In the UK, the biggest risks are associated with the housing market, which is why last month the Bank’s Financial Policy Committee took graduated and proportionate actions.

“The Bank’s role is not to control house prices. Nor can the Bank do anything to address the severe structural problems across the UK caused by a chronic lack of new housing supply. Our job is to mitigate the risks to the broader economy that arise from these underlying challenges.”

By 2018, 2.3 million households could spend more than a third of their post-tax income on debt.

This is according to a new report by the Resolution Foundation, which also warned that 800,000 “highly geared” borrowers could become mortgage prisoners should the base rate rise to 3% - which it is estimated it could do by 2018.

The Resolution Foundation has made several recommendations off the back of its research. One of these is to the Bank of England, suggesting that it needs “reliable evidence” of increasing incomes before lifting the base rate.

Another recommendation from the Resolution Foundation is that homeowners should be provided with assistance to restructure their debt or exit the market. This should include free debt advice and assisted voluntary sales.

“We need an orderly and carefully-managed approach to managing the debt overhang in order to minimise the numbers pushed over the edge as borrowing costs rise, and to improve the safety-net in place for those who can’t avoid such an outcome.

“A recovery which sees living standards rise right across the income distribution would, of course, be the best approach to

managing debt,” said Matthew Whittaker, chief economist at the Resolution Foundation.

He added that the legacy of debt will not simply go away once economic growth returns.

The International Monetary Fund (IMF) has increased its forecast for the UK’s growth.

It has raised its expectations for the second time in 2014, predicting growth of 3.2% in 2014 and 2.7% in 2015.

This means the UK maintains its position as one of the fastest-expanding major economies in the world.

Top News Stories

The UK economy grew by 0.8% in Q2 2014.

The latest figures from the Office for National Statistics show that this is the second consecutive quarter-on-quarter increase of 0.8%.

In Q2 2014, GDP was estimated to be 0.2% higher than the peak of Q1 2008 and 3.1% higher than the same three-month period in 2013.

The Royal Bank of Scotland (RBS) has revealed surprise profits.

The bank brought forward the announcement by a week after first-half profits almost doubled to reach £2.6 billion.

The 93% increase in profits came as a result of the UK’s economy improving, with its loan losses reducing from £1.8 billion to £269 million.

RBS chief executive Ross McEwan said: “The results we are posting today show the steady progress we are making as we take the steps to be a much simpler, smaller and fairer bank. These results show that underneath all the noise and huge restructuring of recent years, RBS is a fundamentally stronger bank that can deliver good results for customers and shareholders.

“There is progress on all of our key priorities - capital is stronger, costs are lower and customer activity is gradually improving although we have only just started with our programme to make it easier for customersto do more business with us.”

Despite the strong first-half results, Mr McEwan added that RBS is still managing legacy issues, such as litigation and conduct, and these will likely have an impact on future profits.

Nationwide has capped all new mortgage lending at 4.75 times borrower income.

The building society has put in place the restriction on all new residential lending. Lloyds and RBS have capped loans above £500,000 at four times an income.

Guidance from the Bank of England’s Financial Policy Committee notes that mortgage lenders should not have more than 15% of their total lending above 4.5 income multiples.

In addition, Nationwide will test whether a potential new borrower could afford their mortgage at a rate of 6.99%.

Weekly payment protection insurance (PPI) complaints have fallen, but still remain at 5,000 a week.

This is according to the Financial Ombudsman Service (FOS), which revealed the decline from last year, where it received around 12,000 PPI complaints per week.

More than £15 billion has been paid out in PPI compensation since January 2011.

It also noted that complaints are not just relating to mis-selling, while the FOS is increasingly asked to step in at the later stage due to settlement disputes.