Re-building confidence in the lending market, Working Party on Land Registration UNECE 2012, London, Paul Broadhead, Head of Mortgage Policy, Building Societies Association

1. Rebuilding confidence in the lending market: The role of
UK Building Societies and mutuals
Presentation to Working Party on Land Administration
United Nations Economic Commission for Europe
11 October 2012
Paul Broadhead
Head of Mortgage Policy
The Building Societies Association

2. Agenda
• What are Building Societies?
• Perception of financial services and the deficit
of trust
• Housing market
• Horizon Scan
• Falling home ownership
• The future of land registration?

3. Overview of Building Societies
(plus the Co-operative Bank)
Approx Data 2011
• 47 building societies – very large to very small
• 50,000 staff (full and part-time)
• Just under 2,000 branches
• 2,500 ATMs
• 20 million investing members
• 2.6 million borrowers
• £375 billion assets
• 75% retail funded
• 87% residential mortgage lending
• £442 million post-tax profit 2011
• 20% of outstanding mortgages & 22% deposit savings

4. Opportunities
• Mutuals are long-term institutions, well able to withstand short-term
variations in activity
• Current distrust of banks – mutuality, and “localness”, the obvious
alternative
• Demutualisation failed
• High customer service levels – including trust
• Even if markets are quiet for now still a huge housing need
• Many housing initiatives – self-build, shared ownership/equity, local
market knowledge, Housing Hub
• On many savings initiatives – ISAs, CTF, JISAs – ahead of the
market
• Innovative capital instruments

5. Mutuals: Better customer service
An independent survey published in July 2012
showed that Mutuals outscore plc banks on these
measures:
• Looks after the communities it operates in
• Offers reasonable value for money
• Customers trust them to act in their best interests
• Values the customer
• Deals with complaints quickly and effectively

6. The Economy and
Markets
• GDP growth around 1% pa
• Unemployment rising, inflation falling (except
last set of statistics)
• House prices stable – but regional variations
• Owner-occupation falling sharply – down
0.5% a year from 2003-10. Down 1.4% in
2011.
• Private rented sector up from 10% in 2000 to
16.5% in 2011

7. English Household Survey
February 2012
• Owner occupiers:14.45 million in 2011.Down from a
peak of 14.79 million in 2005
• Owner occupiers buying with a mortgage made
average weekly mortgage payments of £143 (€177;
$229)
• Average weekly rent payments of private renting
households £160 (€198; $257)
• Average weekly rent payments of social renting
households £79 (€98; $127)
• 59% of private renters and 23% of social renters
said they expected to buy a home in the UK at some
point.

8. Current Market
Conditions
£bn Gross lending, UK
400
350
363
345
300
291 288
250 277
254
200 221
150
160
143 135 141 142
100 120
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012f
Historical data: Bank of England, Forecasts: BSA

9. Current Market
Conditions
£bn Net lending, UK
120
100 110 108
101 101
80 91
79
60
54
40
41 41
20
12 8 9 10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012f
Historical data: Bank of England, Forecasts: BSA

10. Current Market
Conditions
£bn Change in private sector retail balances, UK
90
80
70 77
75
69 68
60
58 58 58
50
40 45
30 33
31
28 28
20 25
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012f
Bank of England, BSA

11. Consumer
Demand
Now is a good time to buy property in the UK?
60%
Agree
40% 44%
Net
20% 20%
agreement
0%
-20% -24%
Disagree
-40% (-ve)
-60%
Jun-08
Jun-09
Jun-11
Jun-10
Sep-08
Dec-09
Sep-11
Dec-08
Mar-09
Sep-09
Mar-10
Sep-10
Dec-10
Mar-11
Dec-11
Mar-12

12. Consumer
Demand
Perceived barriers to property purchase Raising a deposit
70%
64% Access to sufficient
60% mortgage finance
56%
50% 53%
Lack of job security
40% 39%
30% Affordability of
monthly mortgage
20% 18% repayments
12% Concern about future
10%
falls in property prices
0%
Stamp Duty costs
Mar-09
Mar-10
Mar-11
Mar-12
Jun-08
Sep-08
Dec-08
Jun-09
Sep-09
Dec-09
Jun-10
Sep-10
Dec-10
Jun-11
Sep-11
Dec-11

13. BSA Property Tracker
• Consumers say that credit conditions have eased
in September
• Only 3% of buyers put off from property purchase
have been refused a mortgage previously
• 23% of first time buyers are put off buying a
property due to a fear of being refused a mortgage
• More people think now is a good time to buy a
property compared to June 2012.

14. Recent Performance
• Customer preference swings further in favour of
building societies and mutuals
• Trust in building societies remains solid
• Gross lending up 38% in H12012 v H12011
• Mortgage approvals up 45%
• Lending has grown each month this year on a year
on year basis

15. Mortgage Regulation
Mortgage Market Review
• Final rules expected soon
• Rules will be accompanied by a robust impact assessment
• Lord Turner has called for a wide ranging debate on the final proposals
BSA messages
• Impact assessment must take into account welfare impacts, other regulatory
initiatives and impact of specific consumer groups
• Debate must be inclusive, not exclusive
• Transitional arrangements are critical in order not to disadvantage existing
mortgage holders

16. EU Directive on
Mortgage Credit
• Proposed Directive published March 2011
• Key Concerns:
– The inclusion within the scope of the Directive of Buy To Let
mortgages
– Provision of advice (the text currently suggests that to give advice,
lenders will be required to advise on products from across the
market)
– Pre-contractual disclosure (the potential replacement of the KFI
with the European Standardised Information Sheet (ESIS)).
• Still a long way to go:
– “Trilogue” negotiations have started but this Directive is not a priority
– Concerns remain, but there are also some positives
– Final vote in plenary session of European Parliament is scheduled for
December 2012 but expected to slip.
• MMR will not wait

17. Government
Housing Strategy
• "Laying the Foundations: A Housing Strategy for
England" published in November 2011.
• Sets out the problems well, but has limited answers
for tackling them.
• Focussed on owner occupied and social housing,
with shorter sections on the private rented sector.
• Much of the document sets out schemes for
providing new homes
• Of primary interest to lenders are the new Right To
Buy Scheme, the NewBuy Scheme and support for
self build

18. CQS
• Lenders welcome schemes from regulators to improve
standards in conveyancing and to tackle fraud by
solicitors.
• The Law Society’s Conveyancing Quality Scheme is a
good example of how solicitors can flag to lenders that
they are experienced in conveyancing and have robust
procedures in place to ensure quality. Many lenders are
beginning to require CQS or an equivalent standard in
order to gain access to conveyancing panels.
• Any quality marks must be robustly policed and
enforcement action taken against any firms not meeting
standards.

19. New technology and land
registration
• The consumer journey for buying property in the
UK is long and confusing.
• The number of professionals involved in a property
transaction, the various processes they must go
through and lack of automation contribute to
lengthy transaction times.
• We welcome advances in technology which will
speed up the process, improve the consumer
experience and help to reduce property fraud.

20. Building Societies Association
Thank you

21. Rebuilding confidence in the lending market: The role of
UK Building Societies
Presentation to Working Party on Land Administration
United Nations Economic Commission for Europe
11 October 2012
Paul Broadhead
Head of Mortgage Policy
The Building Societies Association