It is time for the £1.2 trillion UK mortgage lending industry to pull together, focus on quality, and innovate for the good of customers and the long-term health of the UK housing market, according to a speech by Council of Mortgage Lenders chairman Martijn Van der Heijden today to an audience of over 600 at the CML annual lunch.
By focusing on three areas - confidence, quality, and skills - the industry can contribute a lasting legacy to a healthier housing market for the long term, Mr Van der Heijden said. He emphasised the importance of increasing confidence:
Mr Van der Heijden commented:
"I think we have to get more honest, more transparent, more intelligible, to our customers... We need to be clear about what we provide and how we provide it. More importantly, we need to make a true cultural shift from a sales culture, to a service culture. Somehow, after deregulation but before the credit crunch, mortgage lending sleepwalked into becoming a commoditised sales business rather than a true customer relationship business. It took the credit crunch to wake everyone up, and now we need to make sure we stay awake."
However, increasing confidence should not simply mean defaulting to the ultra-conservative:
"What we shouldn't do is build in a safety buffer on capital, a safety buffer on conduct, a safety buffer on market differentiation and end up with a small market of homogenous offerings. There may be pressure from regulators to do so, but to throw away our diverse market place would be an eternal shame and won't help society."
At the same time, Mr Van der Heijden suggested that the industry needs to support regulators more actively when scrutiny is legitimate:
"We should be braver about standing up for doing the right thing, and doing business in the right way... We should stand up for logic, by for instance making the obvious but strangely absent point that lenders only make money by lending - and therefore do want to lend... What we shouldn't do is turn a blind eye. While we should defend our turf against regulatory excess, we should equally support efforts to identify areas where there are attempts to circumvent rules and allow poor lending to slip through the net."
Mr Van der Heijden acknowledged the significant challenges that lenders face in meeting their goals under current economic conditions, including an unprecedented new wave of regulation. However, he observed that there is much that the industry can do to improve conditions for customers, and contribute to a healthier market for the long term.
Emphasising the importance of innovation, he said:
"We should continue to innovate for our customers and ensure that we don't fall into the trap of hiding ourselves in the middle of the pack as a response to regulatory risk. Too often in the past, innovation was a euphemism for higher risk. That kind of innovation is not what I mean at all. What I mean by innovation is making it simpler for the customer, providing solutions where there aren't any. Creativity and innovation can be a challenge for lending businesses operating in a cost-controlled environment. But necessity is the mother of invention, and we are the people who have to do this. Innovation won't invent itself."
The CML can harness significant expertise from its diverse group of members, from small lenders with fewer than 20 staff, to the largest with over 100,000, who together undertake around 93% of the UK's residential mortgage lending.
The Chairman reflected:
"I hope you will join me on a journey that begins right now. Through the CML, over the next few months we will be attempting to do something that we have not done before. We will pull together an honest self-evaluation of the mortgage lending industry, by the mortgage lending industry. We will try to look ahead, and identify how we can improve our own contribution to UK housing provision - sustainably, profitably, and responsibly... While I don't want to see the good things about our market and our industry lost or forgotten, I am equally certain that we shouldn't be too afraid of change...Let us at least see if we can't collectively unlock some new and positive thinking about our collective contribution to the future UK housing market."
