Is product innovation being tied in knots?

24 Jun 2013

I’ve always been something of an optimist and always try to find the silver lining to any cloud, but this positivity doesn’t mean I’m blind to the possible problems the mortgage industry may run into at any point.

Take the government's Help to Buy scheme as a case in point. Despite the many dissenting voices, I'm broadly in favour of the initiative - indeed of anything that attempts to stimulate market activity - but this support won't preclude me from noting the concerns of house price bubbles and exit strategies.

Indeed, a column I read recently served as a stark warning of the possible return to the days of boom and bust. It expressed fears that by taking a short-term view of things there is the risk of a brief fillip for the market being swiftly followed by another crisis.

The article didn't solely cite Help to Buy as something that may prompt this course of action, although it did suggest it could be a contributory factor. Another potential cause mentioned was the "accumulation and interaction of numerous, rapidly changing and uncoordinated regulatory initiatives from around the world".

This is something I've long worried about - while each piece of legislation in its own right seems sensible enough and designed to make things better for the consumer, there is a danger of lenders and brokers being tied in knots by contradictory edicts. Factor in some of the more leftfield proposals from Europe such as the recent double APR suggestion and it ends up doing more harm than good.

Talking of avoiding a return to the dark days, it pains me when I read calls urging for a relaxing of the capital requirements that banks face. Yes, in the immediate short term such a move may mean banks are able to lend more freely and create better products, but it could also herald a somewhat brisk return to some of the reckless behaviour we witnessed before the global financial crisis began.

At a time when we are preparing for the implementation of the Mortgage Market Review - a body of legislation that is underpinned by a determination that the industry is never allowed to return to its previous practices - it seems counter-productive for some quarters of the mortgage market to be pining for the days of yore.

At a time when confidence is beginning to return to our sector, it pays to take a wider perspective on things. We've paid the price of short-term fixes in the past, so it is vital we learn from past mistakes and adopt a more balanced, long-term approach this time round.

 

Bob Hunt

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