Puberty.
It brings with it so many changes. Some welcome, some not so welcome. I remember when my voice first showed signs of breaking. I was on stage, playing Joseph in 'Joseph and the Amazing Technicolour Dreamcoat'. I was 11 and the gym hall was full of parents watching us kids. As I embarked on my BIG solo of Close Every Door To Me, it hit.
"For I know I shall Fiiiiiiiiiiiiiiiiiiiiind".
"Erh, what the hell was that?!" I asked myself.
The big note warbled. I continued as every pro should, but remember looking around and seeing the sniggers. Some things just stick with you, and that did me. Puberty is something we all go through and it brings with it a rollercoaster of emotions. Excitment, frustration, anger, confusion... it is lifes free ticket to the greatest ride on earth. And now, I believe it has hit the mortgage industry.
We have seen the industry grow over the years. We have seen it through the teething of the 90s (17% interest rates were as painful as incisors cutting through!), watched the growth spurt (buy to lets booms of the early naughties), and we all remember the "first steps of FSA regulation." Now, comes the mortgage industries steps into puberty. It is a defining time. Puberty defines the person you become for the rest of your life and is the first signs of maturity. Whilst these changes are difficult to cope with and sometimes more challenging than we perhaps ever thought they could be, we know come the end of it, our character is defined and that puberty lays down the blueprint of what we will become.
This may seem a strange comparison to draw. We have seen a lot in the mortgage industry but what we are now in, are our defining moments. Lenders are making some big changes to their criteria and these changes may come across much criticism but we need to look at the bigger picture. We need to look at why these changes are being implemented and we need to learn to cope with them as they will not be going away for a while. Santander's recent reduction of interest only to 50% was, at first, a bit of a shock. The reality is however, that really we all knew this day would come. How this decision will influence the other lenders remains to be seen, but HBOS followed suit soon after tightening their interest only rules and we expect more to follow. It is a big change from what we were used to. 95% interest only seems almost mythical now. 90% self cert?! People coming into the industry (you brave brave souls!!) must think "surely not?" Surely there was never such a product?! Well there was. 90% self cert, interest only. Its laughable now to even think that such things ever existed but they did.
Such products were like playtime at nursery. They were a pleasure, but lets be honest they simply cannot go on for the rest of your life. We adapt to change in our every day life, in our growth and we understand why such change is implemented. For the greater good. After much reflection, perhaps a little bit of sulking, and then a complete reality check, its clear the criteria changes we are witnessing are all for the greater good of the economy. With so many examples of irresponsible lending in the past, lenders are now asking the question "how will you repay the mortgage at the end of the term?" and we are up in arms at why they are asking! I know we want to be treated like adults, but the economy is in a mess. We must all unite and find a route to recovery.
It could be argued with no huge increases in SWAP rates of late, that the increase in interest rates we have seen since mid December represent lenders looking to increase profits by increasing margins. But, with everything going on in Greece right now, with the threat of how that could impact Europe and more so ourselves, do any of us really want to be borrowing as much as the banks will lend us and show no signs of how we intend to repay that debt? Who knows what is round the corner!
Puberty brings with it mood swings. We accept that, and these mood swings are often symbolic of lenders and their attitude to brokers/clients and their trust they place in us and our abilities to maintain the payments of the funds they are lending us. We are all maturing in our concept of debt because we have to and because we are seeing first hand the implications that it will have if we don't. We are not taking on as much as we used to and looking at repaying the debt again, rather than relying on property growth to do so for us.
Perhaps one of the most stupid things I have ever done as a growing teenager was "swan dive" into collection of rubbish bags placed outside a pub. At the time, I was an adolsecent, growing up without a care in the world and just having fun. Looking back my thoughts are "what if there were broken bottles of glass in there, what if someone had disposed of a sharp instrument that would have impailed me on impact?" I had cleared a good 5 - 6ft of air whilst forming my swan dive. Actually, it was pretty cool! It could have been very messy. The mortgage market has had these "swan dive" moments and now with perhaps with the benefit of hindsight, looking back and ensuring such moments do not happen again.
Lets embrace the puberty/maturity the industry is showing. I know it is not what we want, and hey none of us every really want to grow up, but we have to. The current climate is teaching us to understand debt again and to try and keep it a little bit more under control. Whilst we find our way to handleing these times, think back to who you were when you were young, the decisions you made and how they shaped your life. And remember that puberty, as tough as it was, was a necessity and has made you the unbelieveable person you are today.
Growing up is hard. But is worth it.
Is that some bin bags i can see... "WAHOOOOOOOOOOO..."
