This bulletin provides a comprehensive overview of the UK's financial services sector, including problems at The Co-operative Bank, the latest unemployment and housing statistics and other news related to the mortgage market.

1. APRIL 2014
The Mortgage Market Review (MMR) came into effect on April 26th
50% of respondents to the HML MMR survey had identified gaps, but said
they would be ready for April 26th. 8% of respondents claimed they would
not be ready in time for the MMR deadline
HML has been shortlisted for a European Outsourcing Association award

2. HML News
HML‟s MMR survey has
revealed that 8% of
respondents did not think
they would be ready for the
April 26th deadline.
The anonymous survey found that 50% of
respondents – the majority of which were lenders
and third-party mortgage administrators – had
identified gaps, but would be ready for the MMR.
Over 40% of respondents believed the MMR
would have the greatest impact upon change of
processes across the business. Almost 25% said
the potential for customer frustration was their
biggest concern.
In addition, a fifth of respondents believe the MMR
is not a move in the right direction for the market.

3. HML News
HML has been shortlisted
for a European Outsourcing
Association (EOA) award.
We have been shortlisted in the European IT
Outsourcing Project of the Year category for
our work in assisting our Irish lenders in being
ready for the Single Euro Payments Area
(SEPA) regulation.
The SEPA Regulation was adopted in 2012
and had an initial deadline of February 1st
2014 when European banks had to ensure
direct debits and credit transfers adhered to
SEPA. As a European Union member, using
the euro, any Republic of Ireland direct debit
transactions must comply with SEPA
regulation as defined by the European
Payments Council and the Irish Payment
Services Organisation. However, due to
delays in some member states of
implementing the new system, the deadline
was pushed back until August 1st 2014.
• HML exceeded the original SEPA deadline
by three months and has met the new
deadline eight months early
• 2,209 transactions were carried out under
the new system in February 2014 alone.
This totals €1,590,101.90 across all of
HML‟s Irish clients and 37% of all cash
collected on HML‟s Irish portfolio
• Meeting client SLAs means no unnecessary
cost was incurred either by HML or its
clients, and it also prevented customer
distress from occurring by being asked to
make their mortgage or arrears payments
by another means
Padraig Collery, projects manager at
Start Mortgages, said: “HML worked
extremely hard on this project and delivered a
very high performance, not only ensuring that
Start was ready well ahead of the SEPA
deadline, but also in the partnership approach
they took. They kept us involved and updated
on progress at all times and the project
relationship management I experienced
means I‟d have no hesitation with working with
the HML project team on future business
critical projects.
“The project was launched almost a year ago
and was one of the most critical and
challenging projects undertaken between
Start, HML and our third-party direct debit
collections service provider. We had an issue
at the final test which was resolved from an
exchange of explanations and agreement on a
plan to resolve the issue. I very much
appreciate the openness in which HML
managed the project. The project manager
never hesitated in letting me know if there was
a problem. This approach was central to the
confidence we had in each other during the
project and reflected best practice towards
open and honest communications and
relationship management.”
Padraig Collery, Start Mortgages

4. HML News
HML sponsored the Council
of Mortgage Lender‟s (CML)
Annual Lunch 2014. Andy
Wiggans, former specialist
lending director at The
Skipton Group, provided a
welcome speech.
“At last year‟s lunch, we laid out a theme for
the day of Transition, Change and
Collaboration. There have been many
examples of these themes over the past
year, including the FCA‟s finalised guidance
regarding interest-only mortgages, growth in
gross lending driven by the Funding for
Lending Scheme and Help to Buy and the
close work of the CML and FCA with the
delivery of the MMR. We‟ve also recently seen
the output from the FCA‟s thematic review on
arrears and possessions.”
He went on to discuss how 2014 appears to be
a turning point for the UK‟s mortgage
market, with the CML forecasting that lending
will reach £195 billion this year and the Help to
Buy scheme impacting housing demand and
sentiment.
“In our first newsletter of the year, Paul Smee
described 2014 as a year of challenge, and I‟d
certainly agree with him. But as a market, we
need challenges to ensure we go the extra
mile, whether that‟s in dealing with new
regulation, increased lending or ensuring the
right outcomes for customers.
“The affordability consequences of an interest
rate rise are one of the challenges we believe
lenders need to start preparing for as soon as
possible.”
Director-General of the CML Paul
Smee also provided a fantastic
speech.
His point about customer reaction being a real
unknown in the post-MMR world was certainly
an important one. It follows the findings of our
recent HML survey that showed almost 25% of
respondents believe the greatest impact of the
MMR will be customer frustration.
Each guest received a truckle of Wensleydale
cheese to celebrate HML‟s Yorkshire roots and
the Yorkshire Grand Depart of the Tour de
France.

5. HML News
Nigel Turner, chief
commercial officer at
HML, welcomes the positive
announcements in the
March Budget, but urges
lenders to heed caution over
potential increases in
mortgage interest rates.
Speaking to Mortgage Finance Gazette, he
said it was great to see the positive sentiment
off the back of the Budget. This included the
extension of Help to Buy part one, the tax-free
personal allowance increasing from £10,000 to
£10,500 and the cash ISA allowance
increasing to £15,000.
However, Mr Turner added: “At HML we
urge lenders to keep an eye on the risk of
mortgage interest rate rises, or interest-rate
susceptibility. While it is fantastic to see some
encouraging steps forward off the back of the
Budget surrounding Help to Buy, savings and
pensions, there also needs to be focus on the
issue of interest rate rises and lenders‟ most
vulnerable mortgage customers.
“Interest-rate susceptibility has been a hot
topic at HML for some time, especially as we
are in the unique position of being the UK and
Ireland‟s largest third-party mortgage
administration company. With £37 billion
assets under management for dozens of
clients, including building societies and major
banks, we don‟t just have a view of one
mortgage portfolio, but several. This means we
have seen how mortgage customers have
been impacted over the years, from negative
equity and repossessions to arrears and
interest-only mortgages.
“As well as our wide-ranging view of the
mortgage market, we also have market-
leading advanced analytics that enable us to
identify the portfolio and individual customer
credit risk from an increase in interest rates
through analysis and stress testing. Combined
with credit bureau and behavioural data and
captured Potential Impairment Indicators, the
information provides a robust picture of a
mortgage customer and their
account, including their future ability to deal
with payment shocks.
“The results allow us to build a tailored
customer contact strategy that includes
personalised letters that lay out how much a
mortgage would cost each month under
various interest rate increases.
However, during our interest-only customer
contact campaigns, we have seen how
effective outbound telephone calls are also in
raising awareness and resulting in customer
action, and the most vulnerable mortgage
customers should also be telephoned when
lenders are highlighting interest-rate
susceptibility.
“It is important to put practical outcomes in
place for customers, and HML has developed
a range of solutions, including personal budget
advice, benefits assessment, personal money
reviews and the ability to make overpayments.
“Of course, it is not just current customers that
lenders need to focus on. With the extension
of the Help to Buy set to help thousands of
people on to the housing lender, lenders
should not rely on the MMR‟s stress testing
and income and expenditure forms to ensure
loan affordability. Major customer life events
and other unexpected scenarios can still
occur, and it is imperative that lenders plan for
these now and ensure they have the
culture, processes and strategies in place to
deal with these to ensure the best outcomes
for customers.”

6. Industry Statistics
Consumer Prices Index
BoE Base Rate
Unemployment Rate (ONS)
Halifax House Price Index
Gross Mortgage Lending (CML)
Home Repossessions (CML)
FEB „14
1.7%
MARCH „14
0.5%
NOV-JAN „13/„14
7.2%
FEB „14
Up 2.4% on JAN
Average price
£179,872
FEB „14
Down 6% on JAN
£15.2 billion
2013 TOTAL
28,900
JAN „14
1.9%
FEB „14
0.5%
OCT-DEC „13
7.2%
JAN „14
Up 1.1% on DEC
Average price
£175,546
JAN „14
Down 8% on DEC
£15.5 billion**
JULY-SEP „13
7,200
DEC „13
2%
JAN „14
0.5%
SEP-NOV „13
7.1%
DEC „13
Down 0.6% on NOV
Average price
£173,467
DEC „13
The same on NOV
£17 billion
APR-JUNE „13
7,700
*Date reflects what the statistic was during that period, rather than
when the statistic was published
** January figure has since been revised upwards to £16.1 billion
Consumer Price Index
BoE Base Rate
Unemployment Rate (ONS)
Halifax House Price Index
Gross Mortgage Lending (CML)
Home Repossessions (CML)
MARCH „14
1.6%
APRIL „14
0.5%
DEC-FEB „13/‟14
6.9%
MARCH „14
Down 1.1% on FEB
Average price
£178,249
MARCH „14
Up 4% on FEB
£15.4 billion
2013 TOTAL
28,900
FEB „14
1.7%
MARCH „14
0.5%
NOV-JAN ‟13/‟14
7.2%
FEB „14
Up 2.4% on JAN
Average price
£179,872
FEB„14
Down 6% on JAN**
£15.2 billion
JULY-SEP „13
7,200
JAN „14
1.9%
FEB „14
0.5%
OCT-DEC „13
7.2%
JAN „14
Up 1.1% on DEC
Average price
£175,546
JAN „14
Down 8% on DEC
£15.5 billion
APR-JUNE „13
7,700

7. Industry Statistics
Consumer Price Index
The CPI declined by 0.1% on February to
1.6%. The largest contribution to the CPI‟s
decline came from lower motor fuel
costs, although this was partially offset by
upward pressures from the alcohol and
tobacco, and restaurants and hotels sectors.
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.
Unemployment Rate
The unemployment rate for December 2013 to
February 2014 stood at 6.9%, representing
2.24 million people. This is a five-year low.
The claimant count also dropped to 1.14
million, the lowest number since November
2008.
The average weekly wage also increased by
1.7% when compared to the same period in
2013, with the typical weekly pay packet
before taxes and other deductions £479.
Halifax House Price Index
The average price of a home declined by 1.1%
between February and March to reach
£178,249. However, typical residential
property prices in the three months to March
were 2.3% higher than Q4 2013 and 8.7%
higher than the same quarter last year.
Mortgages director at Halifax
Stephen Noakes said: “Housing demand
continues to be supported by an improving
economic outlook, growth in
employment, rising consumer confidence and
low interest rates.
“The recent strengthening in house price is
increasing the amount of equity that many
homeowners have in their home. This will
potentially encourage and enable more owners
to put their property on the market for sale over
the coming year, therefore boosting supply and
easing pressure on prices."
Gross mortgage lending
Gross mortgage lending stood at £15.4 billion in
March, according to the Council of Mortgage
Lenders (CML). This represents a 4% lift on
February and is 33% higher than the £11.6
billion noted for March 2013.
For Q1 2014, gross mortgage lending
represented £46.3 billion, a 37% increase from
the same quarter in 2013 but a 10% decline
from Q4 of last year.
Bob Pannell, chief economist at the
CML, commented: "Alongside benign
developments in the wider UK economy and the
labour market, housing market sentiment
continues to strengthen.
"There are currently no signs of significant
market disruption, arising from the imminent
application of new lending rules associated with
the Mortgage Market Review. While some
mortgage lending indicators have eased back
gently, this is from the very high levels of recent
months.
"The Financial Policy Committee continues to
be vigilant to housing market
developments, and to remind the market of its
ability to act before problems to financial
stability set in."

8. Top News Stories
Vince Cable has warned
that property prices are
becoming unaffordable for
middle-income earners in
Britain.
The business secretary made the comments to
The Independent.
Mr Cable commented: “The fundamental
problem is a chronic imbalance between
supply and demand. A recovering mortgage
market is just fuelling demand again.
“A family on average income is nowhere near
able to afford a house at the average price.
Property has become much more unaffordable
for people on middle incomes.”
He added that the average property price is
around 5.5 times average earnings. In the mid-
1990s, this stood at three times.
The Royal Bank of Scotland
(RBS) has announced 44
branch closures, 14 of which
have been noted as the last
branches in their locations.
In its 2010 customer charter, the bank said it
would not close branches that were the last
ones in their towns.
A spokesperson for RBS said:
“Banking has significantly changed over the
past few years, with customers choosing to
bank where and when is convenient for them.
The Bank of England‟s
director of financial stability
has warned about asset
management risks.
Andrew Haldane has said that asset managers
could be on the same level as banks when it
comes to the risk they pose to the world‟s
financial system.
Mr Haldane said: “A key question, here, is
how household behaviour is likely to respond to
bearing these additional risks, especially in
situations of stress. Will investors ride them out
or run to the hills, stick or twist? It is impossible
to know for certain. But experience during the
crisis is revealing.”
He pointed out that the top ten asset managers
account for just less than 30% of the sector.
While asset managers are not immune to
insolvency, Mr Haldane did describe them as
being “insolvency-remote”, due to the fact that
as an agency function, they do not bear
liquidity, market or credit risk.
The Co-operative Bank
made a loss of £1.3 billion in
2013.
The bank revealed it did not expect to make a
profit this year nor in 2015. Chief executive
Niall Booker commented: “We appreciate
that customers and other stakeholders continue
to feel angry about how past failings placed the
future of the business so seriously at risk.

9. Top News Stories
“There are still major hurdles ahead to
overcome. The level of change required in
improvement in processes, systems and
culture is significant. We are determined to
rebuild trust in the bank after the events of last
year and reward the loyalty our customers and
shareholders have shown us.”
KPMG also placed a “going concern" warning
on the bank to highlight how essential it was
for it to raise extra funds.
Mr Booker added that he wanted to create a
smaller, more efficient bank that is focused on
small and medium-sized businesses and
individual customers, backed by a quality
service.
The UK‟s economy grew by
0.8% during Q1 2014.
The Office for National Statistics revealed that
the largest contribution to this growth came
from the services sector, which enjoyed
expansion of 0.9%.
The economy grew by 0.7% during the final
quarter of 2013.
Chancellor of the Exchequer George
Osborne said it showed that Britain was
“coming back”, but the growth should not be
taken for granted.
He added: “We have to carry on working
through our long-term economic plan. For the
first time in a decade all three main sectors of
the economy - manufacturing, services and
construction - have grown by at least 3% over
the last year.”
For the first time since
January 2009, there has
been a positive annual
growth in personal loans
and overdrafts, according to
the British Bankers‟
Association (BBA).
In March 2014, credit card spending rose by
6.3% to reach £8.2 billion, while net borrowing
on overdrafts and personal loans increased by
0.5%. The association said an improving
economy and greater consumer confidence
contributed to this growth.
Chief economist at BBA Richard
Woolhouse said: “This is against a
backdrop of continued buoyancy in the
mortgage market, although growth rates have
slowed slightly in recent months.”
The growth of lending to UK
businesses remained in
negative territory in the
three months to
February, the Bank of
England has revealed.
Lending to British businesses declined by
£500 million, although the rate of decline has
slowed from the preceding three months, when
a fall of £3.3 billion was noted.