Further strong evidence emerged yesterday of an end to the fall in house prices both in the UK and also importantly, in the US.

In the UK, the Land registry has published its figures for June which show a 0.10% rise in House prices. Of all the various UK property price indices, the land registry is regarded as the most authorative as it is based on actual sale prices achieved rather than on mortgage data or pre-sale prices. Growth was particularly strong in London where prices rose 2.0% on the previous month backing up many stories we are hearing of a return to sealed bids and in some instances gazumping in the more desirable parts of the capital. There was also something of a North/South divide with all the regions from and including the Midlands south (inc East Anglia) showing positive growth, whilst Wales and North of the Midlands (note Scotland and NI are covered by separate bodies) all suffered small falls. Again as we have covered for many months now in previous blogs, we believe Q3 marks the end of significant price declines and whilst a national recovery may still be some way off, stability is now being achieved.

Whilst the Land Registry data is good news for the UK, from a global perspective all eyes have been on the US. With over $3 trillion of US mortgage debt out in the markets, the performance of the US residential market is crucial if we are to see a sustained global recovery. Not only do US house prices effect US consumer confidence, they also have large implications for the holders of US mortgage debt packaged up in various imaginative ways. In short until prices stop falling it is virtually impossible to put a line under losses and accurately value mortgage backed securities.  In this regard there was very good news today when the main US index, the Case Schiller 20 city index, rose by 0.31% for May have previously fallen for every month since the market peaked in August 2006 (34 consecutive months). Whilst it may be premature to say that this marks the end of price falls in the US, there is a very definite trend of the market bottoming out as the graph below clearly demonstrates.

 

 

By Stephen Knight, Executive Chairman, Checkmate Mortgages Ltd

 

Like many people, no doubt, I have recently been reinvesting funds which have matured from accounts paying 6%+, trying to get the best of the current derisory savings rates on offer.  This has led me to open several investment accounts online, and I have been astonished at the contrast between the service I have received.

 

The best service checked my passport details as I was completing the application, and took the money from my bank account.   No photocopying, cheque-drawing or posting.  Eight minutes and job done.

 

The worst service required the application form to be printed and posted with a cheque and various documents confirming identity and residency.  At least treble the time and inconvenience to me.

 

With one deposit-taking institution who insisted on post and paper, the envelope containing my cheque and application form never arrived at all, requiring me to undertake the whole transaction again. 

 

The ‘best’ and ‘worst’ service came from building societies, and started me thinking why societies can’t get their acts together and adopt a common process.  It would make investing so much easier, and allow staff to concentrate on more important matters than pushing paper around.  Just as importantly, there would be less exposure to paper-based fraud.

 

No automated system ever tried to commit a crime. The relevance of this is being felt even more by mortgage applicants where there is often more paper flying around. 

 

Of course, it is critical not just to establish borrowers’ identity, but also their ability and propensity to pay.  But with the sophisticated automated underwriting and checking tools now available, this can be better and more objectively achieved by a systems-based approach.  Lord Turner, Chairman of the FSA, endorsed this in his speech on 21 January 2009 when he said: “Many forms of credit, for instance residential mortgages, are best credit assessed via quantative scoring techniques, rather than by individual bank officer judgment”.

 

Those in tune with automation can process an application with the minimum inconvenience to the customer, maximum speed and with the fraud protection that systems-based underwriting and checking can deliver.  Customers are empowered by swift and certain decision, the quick availability of the money and the ability to focus on those aspects of their lives that interest them more than form-filling.

 

Those who get comfort from the manual approach, employ more people to gather and interpret more paper, which causes more incoming and return telephone traffic, and which is quite literally costing individuals and the economy many millions of pounds in direct customer-paid expenses and lost opportunity.  This has, in turn, led to the long delays with some lenders that Peter Stimson has been blogging about, with the average amongst some being 25 days or more to process a mortgage application.

 

Contrast that with the 25 minutes that our new system will take to process an application with full ID, fraud and credit checks.

 

I have heard some argue that it is better for mortgage processing to take longer, but I cannot follow that argument at all.  In what part of the economy would it be successful and sustainable to make something available more slowly than it needs to be?

 

Even with automated processing, there are QA checks to undertake tailored to the risk profile of the individual applicants.  But at least you are then concentrating labour-intensive resource on the few and not the many.

 

I understand why pendulums swing from and to extremes. But to disregard the secure objectivity of automated application assessment in favour of flawed and inefficient paper-gathering, as some lenders are doing, is causing significant damage to transactions, and frustrating customers beyond belief.

 

In the long run, those with the slickest, quickest and reliable service will win out.