Mortgage lenders are unhappy with the Government
Their trade lobbying association - the Council of Mortgage Lenders ( http://www.cml.org.uk/ ) - thinks the Government is wrong to spend taxpayers money regulating Britain's mortgage lenders. Many of the Government's plans to protect consumers are "potential threats", says the CML in its 1998 annual report.

Unfortunately, the CML does not go on to say how those threats might threaten customers. In a recent newsletter however, it dwelled on how statutory regulation of the mortgage industry will cost more than voluntary regulation of the mortgage industry by, er, the mortgage industry.

The report suggests that 1998 was not a good year for mortgage lenders. It cites "new workloads arising from more interventionist policies, particularly as a result of the new Government".

That is clearly a reference to the Government's "threat" to regulate mortgages under the Financial Services and Markets Bill and is the main reason that the CML is flogging the ludicrous Mortgage Code, under which the CML thinks mortgage lenders can successfully and fairly police mortgage lenders.

It was also surprised that the Office of Fair Trading dared to ask lenders for information on how they charge for early redemption, without telling the CML and the Building Societies Association (BSA) what it was up to first! The CML promptly teamed up with the BSA and British Bankers Association to get quick legal advice on whether their members had been breaking the Unfair Terms in Consumer Contracts regulations.

They are now in "ongoing discussions" with the OFT to try to find a solution that lenders are happy with. If they are happy with it, you won't be, and we'll come back to that later in this newsletter.

Customers give lenders bad time
But though the Government is threatening to give mortgage lenders a bad time, another bunch of people have already been giving them a bad time. You.

Mortgage activity (the value of new mortgages) grew by £12bn last year but £10bn of that was actually homeowners switching between mortgage lenders when they found cheaper deals. In other words, mortgage lenders cannibalised each other's business and cut their overall income to do it. Good news for customers, bad news for lenders. The mortgage market is over-supplied, said the CML.

Mortgage lenders were also taken aback by the way the number of house moves fell by six per cent rather than rose by the four per cent that they had expected. That's why the industry ecstatically announced that the number of house moves is now increasing and that house prices are rising.

A self-policing lender is an honest lender
We feel their pain. But perhaps we shouldn't feel it too much. The CML has thought up a couple of tactics to head off regulation. One is to convince the Government that actually controlling lenders is too expensive.

"We don't see any difference between lenders voluntarily regulating themselves and lenders being regulated by law", the CML will argue. "except that it is much more expensive to regulate them by law."

The Home Repossession Page however, does see a difference between lenders voluntarily regulating themselves and the lenders being regulated by law.

• "Voluntary" self-regulation implies that lenders are doing the rest of us a favour by submitting to regulation and that we should go lightly on them when they are accused of mistreating customers. For an example of just how lightly the CML thinks mortgage lenders should regulate themselves, have a look at this letter http://www.home-repo.org/help/mc3.htm where the independent Mortgage Code director says: "yes, this is our bag, now complain somewhere else".
• Nor is this self-regulation independent, as the CML has recently claimed it is. Check the address on the letter in the above link and see what similarities you can see between the "independent" author's address and the CML's address. Their website is at http://www.cml.org.uk..

Campaign against early redemption penalties launched
A quick look at the week's news shows how confident the rest us are that mortgage lenders and the CML can police themselves fairly. The Sunday Times has today launched a campaign to have early redemption penalties banned. Calling them "lock-in penalties", it says lenders often charge borrowers five per cent of the value of the loan to escape the clauses and claims the terms could be a breach of Europe's Unfair Terms in Consumer Contracts Regulations. It quotes Office of Fair Trading director general John Bridgeman, who said he is "dismayed" that so few lenders replied to him when he asked them to change the wording of their contracts last September.

Like we said earlier, mortgage lenders are in "ongoing discussions" with the OFT to find a compromise.

"But we can police ourselves," the CML will doubtless be telling Bridgeman.

You pay... for nothing
It's also telling the Government about its handy plan to protect homeowners who are unable to make mortgage repayments because of redundancy, sickness, whatever. That plan is payment protection insurance a variant of the notorious Mortgage Indemnity Guarantee. It's an easy one to sell to Government as it should allow them to save money in DSS payments. But the Times (again) has done some sums and it says the insurances look distinctly poor value for customers. Without breaking Times copyright I can't go into all the detail but it boils down to this: take out one of these insurances and you'll pay something like 1.4 times what you'll ever get out of it if things turn sour.

Better to save it beforehand or not bother.

Changes to the Home Repossession Page web-site

• updated the Moneymakers page in the Repossession Section
• added new Readers Tales in the Repossession Section: cases 11 and 12
• added a new Do's and Don'ts page on why you should serve DPAs on lenders claiming shortfalls
• added a (very short) list of brokers that offer cheaper, "Australian Rules" mortgages. I'd like to extend this so feel free to mail me with the names of other brokers that do them.
• added new links in the free help section.
• added new links page to personal finance sites.
• There also some minor design changes

[ends]

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