In total Gross mortgage lending was an estimated £13.6 billion in July, increasing from £12.9 billion in June and compared to £14 billion in July 2009.

The modest rise in mortgage activity we’ve seen since June has been set against a low base, and although there has been a noticeable rise in the number of products available to borrowers, and more lenders returning to the market, the mortgage landscape is by no means close to returning to “normal”.

Mortgage lending criteria have toughened, making it difficult for borrowers, particularly the self-employed and first-time buyers who are struggling to obtain the borrowing they require.

Consumer demand will begin to rise again after the traditional summer lull, with buyers keen to take advantage of low interest rates and a softening of house prices, but I would expect the rest of the year to remain pretty subdued as lenders continue to err on the side of caution.

Just 47,643 loans were approved for house purchases and a mere 29,949 loans for remortgages meaning that both sets of figures have now dropped below their previous 6 months average.

First-time buyers have every right to feel discriminated against, as while mortgage lending has become more profitable for many lenders, it is too often targeted at those customers who are already well catered for. Lenders are continuing to walk the easy path.

Much more needs to be done by lenders in order to revitalise the mortgage market. While new entrants such as Metro Bank are welcome, more competition and innovation is required to meet current levels of demand, which are almost certainly higher than the banking world would have us believe.

Meanwhile Nationwide’s latest House Price analysis shows that prices fell by 0.5% in July, with the annual rate of house price inflation slipping to 6.6%.

With more properties coming on to the market and difficulties in obtaining mortgage finance still evident to many, it seems that this is likely to be the trend for the rest of the year.  Whilst certain areas will hold their value better than others, especially within the more sought after areas of London where the supply of good quality stock is still light, the recent spurt in house prices is unlikely to be repeated again this year.

The good news for those who are able to access the highly competitive mortgage products now on offer is that the second half of this year could well be an excellent time to purchase.

However, this week sees the release of a major report involving the “stress-testing” on a range of European Banks to determine their health and, perhaps more importantly, whether they are in a position to cope if anything goes seriously wrong again. These “detailed” tests have been undertaken on 91 banks, including names such as Deutsche Bank and Commerzbank in Germany, HSBC and Barclays in the UK, as well as Societe Generale and BNP Paribas in France.

The worry is that if this is negative we could slip into a second credit crunch. The other worry, as some news has been leaking that certain lenders have walked through these tests, is that they have become a bit of a shambles and cannot be trusted. In other words, if no one believes the results, is this just as bad as a negative result?

Under this shadow, the Bank of England are trying to deal with some contradicting factors; on the one hand the recovery looks like it is petering out, the budgetary cuts are due to bite in the near future and they are even considering boosting their Quantitative Easing policy, on the other hand inflation is still proving sticky and one Monetary Policy Committee member, Andrew Sentance, voted for the second month running for an early hike in interest rates.

Economist Ray Barrell, of the National Institute of Economic and Social Research, told the Times that putting QE back onto the table indicated the MPC were worried about the results of this Stress Test report. He said, “we are sitting on the edge of a volcano and we won’t know until Friday whether it will erupt or not”.

It is sobering stuff, but without trying to be too pessimistic it does seem as if we may have already seen the best part of the year in the mortgage market.

However, too many people like to dwell on the negative, bad news sells don’t you know, and whilst we are all under no illusions that we are still not out of this crises, things may not actually be that bad and will begin to even out.

The reality is probably that the Stress Tests will not actually be too worrying and will have been done to ensure that most banks, but by no means all, pass through safely. So maybe a little rigged then, as my learned colleague Rob Gill says, “I can’t believe even the EU would be so daft as to order a series of tests which could spark a second, European orientated banking crises, cost billions upon billions or Euros to sort out and potentially tear apart the Euro zone.”

What is more, there is of course a positive side to falling house prices and more properties on the market meaning that more people may be tempted back to the market in due course. Mortgage rates are still low, lenders still ultimately need to lend and people still need to move and desire to own their own home.

What is more, people still have a mistrust of banks and there is an increasing demand for independent advice that is unlikely to diminish.

As with everything, sentiment is of paramount importance and if you choose to just concentrate on the negative then do not be surprised when negative things happen. It is much better to be aware of the issues; it is dangerous to be naive, but to concentrate on the positives.

Last word to Rob for another very valid point, “The big risk at the moment is the US talking themselves into a double dip, and they really are talking their way into it rather than there being any underlying causes.”

As individuals, as an industry, as an economy and as a country we should be careful not to do the same.

So what can a bunch of overpaid, oversexed and overinflated egotists teach us all? The answer is simple. In order to deal with adversity and to move forward it is the team that is more important than any one individual, no matter how talented they may feel they are.

In our industry we have been to hell and back with, if the latest rumblings are to be believed, a possibility that more challenging times await us just around the corner.

Fears that a second credit crunch may be approaching are gaining momentum with the end date of support schemes both in the UK and Europe designed to assist banks and encourage lending coming firmly into view.

The fears of brokers and the public alike that we will see a return to more serious dual pricing, more expensive mortgage rates and more dramatic criteria tightening could lead to many businesses and individuals being exposed yet again.

What we as an industry do not want is for the number of brokers to drop past a serious figure of, as AMI have mentioned, around the 10,000 mark. If adviser numbers drop too far then there is an argument that we lose a critical mass that has the power to fight our cause with lenders and take care of the uplift when things eventually do start to return to normality.

For individual firms and the industry as a whole to see this through there has to be a large amount of teamwork.
There may have been some smug grins around when bigger brokers like Cobalt and Charcol went down, as well as several networks, and whilst there is no complaint from me to a clearing of the culture of arrogance and indulgence that blinded much of our industry for a while, these are now very different times and we need to support each other.

It starts from within the company. A recognition that we are all in this together and a dictatorial I am better than you approach will not help matters. The same goes for individual firms or spokespeople openly criticising other brokers. Healthy competition and cheeky banter is one thing, but for now co-operation is what is needed.

This also follows on to the relationship between lenders and brokers. We need to build bridges not burn them. The intermediary sales guys and girls I regularly see people moan to or about are under just as much pressure as brokers are. Their jobs are also on the line and they need our support and understanding to fight their internal battles, whether this be with the risk departments who now rule the roost, a Chief Exec who fails to see the benefit of brokers, or ultimately a regulatory body, Government or European Parliament who struggles to understand our industry.

We all have a simple choice. We can act like the England players and argue amongst ourselves about who is the best, or we can work together as a team towards ultimate success.

Whoever lifts the World Cup on July 11th will know one thing for certain, that they are the captain of the best team and that every member of the squad and training staff contributed to that success.

As someone who was critical of “Boy George” I must say he delivered his speech with courage and conviction. It was a fine performance and blew away many of the doubters. But what of the content?

The key proposal that many of our clients and introducers alike were most concerned with were proposed changes to Capital Gains Tax. As the Chancellor himself conceded, he had considered and reviewed many suggestions around marginal rates of tax and taper reliefs, with many fearing that a 40% rate was a possibility.

The result however, seemed to be a sensible middle ground. There is no change for basic rate taxpayers, whilst for higher rate taxpayers the rate has increased to 28% from midnight tonight, and the exemption rate stays at £10,100.

For many property investors this is not the issue that many feared it could be. First of all, and this is a key point, many professional landlords have various losses and items to offset against tax, so actually may not hit the higher rate tax bracket at all. For them then, this means business as usual.

Secondly, 28% can be considered a manageable amount and will simply be taken into account when the investment decision is made in the first instance. Also, many investors who see rental income as a long-term pension income top-up are unlikely to change their actions because of this.

So the Chancellor does seem to have hit a comfortable middle ground, raising more from a tax without many really suffering or causing the buy-to-let market to disappear overnight. The Chancellor says these changes “would protect the majority of taxpayers, keep the top-rate of CGT in line with the UK’s international competitors while keeping a simple system that reduces the incentives to convert income to capital gains.”

Meanwhile, the 10 per cent CGT rate for entrepreneurs which currently applies to the first £2m of qualifying gains made over a lifetime will be extended to £5m to promote enterprise.

The second key measure, apart from reversing the additional levy on cider of course, is the much-expected rise in VAT from 17.5% to 20% from January 2011. Whilst deeply unsatisfying this was seen as unavoidable by many and at least there was no change to the current zero rated VAT items.

The Chancellor has made some bold moves in trying to cut the budget deficit by more and quicker than expected, with only 23% of these cuts coming in the form of tax rises.

This means a whopping 77% is to come from proposed cuts, so expect demonstrations coming to a local area near you as communities fight for their own services.

Whilst the real details will emerge over the coming weeks, other interesting titbits are a cut in Corporation Tax to 24% by 2014 to try to encourage business, a proposed unilateral UK Bank levy on the balance sheets of UK banks & building societies, as well as the UK operations of Banks abroad. There is also a proposed move to end the compulsory purchase of pension annuities by age 75 to allow for more flexible pension planning.

So, as Nick Robinson says in his BBC blog, “This is what George Osborne meant when he spoke of “the age of austerity”.”

As our resident City slicker, Rob Gill comments “The immediate judgement of that harshest of all critics, the markets, has been both reassuringly undramatic and marginally favourable, with stock markets edging higher and bond yields lower following the budget announcement”.

For the longer term, whether you agree with the changes and cuts or not, the truth is, however painful, something needed to be done and at least we cannot complain that this Chancellor has held back.

It seems that there are many struggles of this type going on in all walks of life at present. The small business against the big boys, local shops battling supermarket giants and the average person trying to get loans from big banks. There are more battles to come no doubt with the emergency budget on Tuesday bringing the widely expected tax increases and cuts, meaning many local communities are gearing up for a big battle to save services that are important to them.

Meanwhile, there has been lots of talk about the changes to the FSA and how this will affect not only all of us in the finance industry, but the wider economy as well.

As with any proposal such as this the devil really is in the detail, but it is interesting that whilst these changes were made in order to try to simplify the much-maligned tri-partite system, there now seems to be more than 3 new bodies to be created! No doubt these will be filled with most of the current employees of the FSA and surely the creation of these new bodies will come at quite a cost.

Would it just have been simpler and cheaper to install Mervyn King as Hectors boss? The FSA has no doubt learnt painful lessons from the last few years and should in theory be well placed to move forward.

The fact that one person is now in charge and has clear responsibility is of course sensible and long overdue. Mervyn is quite right to ask how can he assist in bailing out banks in the future without a detailed knowledge of their day-to-day practices? The Bank of England is the right choice to ultimately regulate the banks themselves.

However, there is still the unknown question as to how far the new body is going to seek to “control” lending practices, as it is a dramatic move to set specific lending policies for banks that are, in effect, independent businesses. Ultimately this says that lenders cannot be trusted to operate as a commercial entity themselves which, unfortunately in some recent experience, seems to have been the case.

Although there was no specific mention in the Chancellors Mansion House speech of the new entity actively restricting for example, Loan-to-values, there are still whispers that this could be the case. Whilst I have no issue with sensible guidelines being set down which lenders can refer to, simply stating that you cannot borrow over 75% LTV, for example is perhaps too simplistic. Lenders did not get into trouble just because they were lending at high loan-to-values, but because many of the business models were flawed and relied on borrowing money from elsewhere without any Plan B.

The real issue of course, is around risk to the lender, whether they are pricing correctly for that risk, assessing the client’s ability to pay and setting aside enough capital to cover the risk. It does seem sensible however to look at an overall risk cap percentage for major lenders so not all of their lending is based in higher risk areas.

What would be more prudent is to look closely at the customer’s ability to pay the loan, with careful consideration given to self-certification and “fast-track” mortgages and ensuring that full and proper advice is given to all customers who walk into a branch to get a mortgage. There are still too many instances of borrowers being able to get large mortgage loans without any advice.

This “advice” issue is of paramount importance and there have been some encouraging signs from the FSA recently that a level playing field for mortgage advisers, whether independent brokers or in branch, should be in place.

It should be remembered that the Government also has to think carefully about the health of the housing market and first-time buyers already struggling to get on the housing ladder. Deposits in London especially are hard to raise as it is, and if these measure are too prescriptive and draconian the whole 1st-Time Buyer Market could be severely restricted for years to come.

The balancing act is for any new rules to effectively ensure that lending institutions are more secure and enable them to compete effectively, without ultimately punishing the borrowers themselves.

Of course we must give this fresh, new approach time to work and we can only hope that they take time to engage the industry, listen to the concerns of brokers, lenders and the public alike and come to some sensible conclusions for the benefit of us all.

As the Flight of The Conchords manager, Murray might say, “Imagine that!”

I must try harder.

Anyway, I was going to write a bit about fixed rates and the fact that I still think not enough people are taking them.

In fact, I do get a little peeved when I keep reading commentators saying that trackers are better value or their latest survey of an undisclosed amount of people suggests that 85.357% of people are opting for trackers. First of all, what sample rate of people is that a survey of? 10? 100? 10,000? Surely, we need a bit of perspective to assess the impact of these things? For all we know it could have been a survey of 2 people and a tin of spaghetti!

Coupled with the “better value” statement, doesn’t this play a part in leading people who should go down the fixed rate route slightly biased before they go off to get advice, or worse still go direct to a lender to not get advice?

If rates do end up rising higher and quicker than expected could this statement be construed as advice rather than just an opinion?

You can imagine the letter – “Mr X of Blah Ltd. stated clearly in The News of the Times that trackers were better value than fixed. As he is a qualified advisor, (we assume), I took his advice and now rates have risen too much. I do not call this better value”.

Ok, maybe I am getting a little carried away here, but it does seem a little too easy for people just to opt for the cheapest option at the moment rather than really analysing their future needs and how they would feel when rates do begin to rise.

This week, for example, 5 year fixes have reached a level that to be honest I did not expect to see again for a while, either just under or slightly over 4%. This is lower than or equivalent to a fair few lenders current Standard Variable Rates, (SVR’s) and should be affordable to many. In fact, arguably if it is not affordable in the near future then you should not take a tracker rate product out anyway as rates will, in my humble opinion, rise by at least 2% in the next couple of years or so, (the best tracker rates now at 2.39%).

In fact, we actually believe that we could see Base Rate at 2% by the end of this year or first quarter 2011, whilst a recent OECD statement suggested that the Bank of England should increase base rate to 3.5% by the end of 2011!

With no real consensus view on where interest rates will be in a year or 2 years time I just think that we should be a little more guarded with comments that are a generalisation.

Are trackers better value than fixes? No, they are cheaper at present, but value can only be accurately recorded from a historical perspective. 2% above a Base Rate of 0.5% is great, (although remember this was an uncompetitive commercial rate a few years ago), but 2% above a Base Rate of 3% is more uncomfortable and 2% above a Base Rate of 5% positively ghastly.

What is true however is that for those lucky enough to have a decent deposit / large equity, mortgage rates in general do appear to look very attractive, but the absolute truth, is that decent advice, not throw away comments, is more important than ever.

Given that it is the very customer base who most want to use interest only this is quite a big deal.

They have also gone further with loans below £500,000 in that applicants can no longer just say they will pay the loan off via the sale of the property, their buy-to-let portfolio or general bonus payments, but must have either a pension or some kind of savings plan. Is the return of the Endowment nigh?

On the face of it this seems to be unfair on those who have a legitimate reason for taking out a mortgage on an interest only basis, however when looked at a bit more carefully there are some sound reasons.

Unfortunately many people have used interest only as a way of making sure they can actually afford the mortgage in the first place and deferred worrying about how they are going to pay it back. Is there really anything wrong with a lender insisting, as they always used to a decade or so ago, that they can see a structured plan in place to repay their debt?

Also, is it really right that someone can borrow 90% LTV and say they will pay the loan back by selling in a few years time? This does not happen with smaller personal loans so why with large ones?

For me, whilst I do see where Lloyds are coming from and they are perfectly within their rights to do so I would rather see underwriters employed to make a case-by-case, sensible,  judgment rather than a one-size fits all approach.
There are many wealthy individuals for whom interest-only is the correct method and gives them the flexibility they require.

It is a topic that is being discussed within every lending institution and it will be interesting to see if other lenders do follow suit.

For me, something does need to be done to limit the scale of interest only borrowing and borrowers need to be much more aware of how realistically they are going to pay the loan back. Pensions and savings plans are underutilised, as for that matter is life insurance to protect the mortgage that is written into trust.

Too many applicants do tend to ignore brokers advice on these points as they are so focussed on buying the house of their dreams and choose to save money on the very things that can help keep them in the property.

The move by Lloyds shows that lenders are not going to allow the blasé attitude of the past decade to continue and, to be fair, there is a lot of merit in this. However, as with anything, sensible advice and a sensible underwriting policy could give us all the best of both worlds.

By all accounts the two really have hit it off which can only be good news for a country that, love ‘em or hate ‘em, desperately needs “strong & stable Government” to tackle our debt issues.

The problems of course, will probably not come from the two at the top, but in the day-to-day working differences between the ministers below and the hard-line party activists. It is a massive test of both Cameron’s and Clegg’s leadership to ensure that these differences are managed and cast aside whilst the similarities and common goals are magnified.

There are many people eating their words at the moment who said that a vote for the Lib Dems was a wasted vote as they will never get close to power! A Deputy PM, 5 cabinet members and a minister in every department is not bad going eh?

So to the job in hand. On the face of it out go some of the more “silly” policies on both sides whilst they concentrate on what they agree on. This is a good thing for us all and we can look forward to a tough old budget in 50 days time!

The cuts will be tough, VAT will probably have to rise and all manner of other arrangements to cut the deficit put in place.

What everyone in the mortgage industry wants to know is what changes can we expect to see? First off it is looking more likely that the FSA will stay. I for one think this is sensible and never saw the point of wasting money scrapping them and building another slightly different organisation probably employing most of the same people!

The FSA have come a long way, they have been through the toughest times and learnt from it just as we all have. There is a way that the Bank of England and FSA can work together more efficiently for all our good.

But never mind all that. The real issue is one that many seem to forget. There is the small fact that there is a £300 billion funding gap in the lending sector as Government aid needs to be repaid. As Rob Thomas, senior policy adviser at the CML highlighted last week, “How realistic is it to believe that retail deposits can be the source of funding to pay back the £300bn the government wants back?”

You can bet your bottom dollar that every lender has this issue at the top of their list and is no doubt at the root of many of the decisions we are seeing that affect us.

How the Government deal with this issue, as well as the wider banking world, is of great importance, but they cannot expect the banks to be able to lend more, pay back the monies owed and raise their capital adequacy all at the same time in the current environment.

As an optimist I actually believe that when it comes down to it the Government will come up with something to plug the £300 billion gap and ease the pressure before lending dries up, but it could well be “squeaky bum” time for a while.

In the meantime, however, whether or not you voted for the newly-weds, we need to all hope that this partnership does confound the rising divorce rates and brings us all a little sunshine, maybe not in the short-term, but certainly in the long.

Whilst Brown did not do as badly as polls predicted a month ago it was very clear that he has not been given a mandate to govern. Nick Clegg admitted it was a disappointing night as many who said they would vote Lib. Dem. did not have the courage of their convictions when it counted most. However, with 23% of the vote equating to just 50 odd seats, the issues of the electoral system are glaringly obvious.

Potentially the most disappointed, however, must have been Cameron. This really should have been his election on the back of horrendous crises, Labour gaffes and the most unpopular unelected Prime Minister for many a year.

The fact that they did not walk in says two things. One that Cameron has failed to convince many, or at least many in his team have not come up to scratch, and second, that people do actually want change, but electoral change rather than just the traditional switch from red to blue.

So, as predicted, we find ourselves in Hung Parliament territory, but what does this mean for interest rates?

There have been plenty of scare stories about the perils of a hung parliament, spread mainly by those with political motives. There is, however, no doubt that whilst some other countries do not seem to have an issue working within a balanced parliament, the UK’s previous experience has not been exactly plain sailing.

What is absolutely clear is that the leading politicians now have a grave responsibility. If they cannot put at least some of their differences aside and resort to the Punch & Judy politics that the country has so clearly railed against then we could have issues.

On the face of it, the city reacts very quickly to news such as this and the hung parliament scenario has been expected for many weeks now, so much of the initial “costs” as far as interest rates are concerned have already been price in.

Bond yields may be a little volatile in the short-term, but this has all been expected and they should settle down quickly.

One interesting little point is that actually the Euro problems are working in the UK’s favour! For all our issues we are not Greece. The UK is traditionally stable and even with a Hung Parliament those who need to invest in European bonds, who do not want to take a risk on a Euro denominated region are looking at sterling bonds. This can actually counteract our own issues and have a stabilising effect. Simplistic perhaps, but you get the point.

If a relatively stable coalition is established and work begins in earnest then there is no reason for rates to jump. In fact, a coalition that actively takes the best from each party and works for the good of the country could have a dramatically calming effect.

There are many who are however, sceptical that such a scenario can be achieved. The city hates the uncertainty that weeks of haggling would cause and this could well lead to two worrying scenarios.

Firstly, investors may continue to lose confidence in sterling which if continues too far may mean that interest rates need to be raised in order to defend Sterling. Secondly, the threat of credit rating agencies seeing no particular plan to cut our deficit quick enough could well lead to the nightmare scenario of a loss of our AAA rating, which could also lead to a rise in interest rates.

In fact any prolonged indecision could lead to a number of outcomes and until we see some of the dust settling we could well see mortgage rates start to rise, reflected initially in fixed rate pricing.

However, at the time of writing Mr Clegg has just come out and stated that he would stick to his word and give first option to those who have won the most votes which more than hints at a Conservative / Liberal Pact.

There is a very big question mark over this however, as undoubtedly the Liberals have more common ground with Labour and I would be very surprised if the Conservatives sign away the political system to Proportional Representation. Although Cameron as PM, Clegg Deputy and Cable as Chancellor may appeal to many!

The funny thing is this is actually what many people I have spoken to actually wanted. Parties being forced to communicate and work together for the good of the country. Yes it may be idealistic and yes we may have another election within the next 12 months, but this election shows clearly that the public want a change from the system that has protected the status quo of 2 party politics for too long.

If Mr Clegg does not get what he wants from the Tories, he may well revert to Labour although whether he will work with Gordon Brown looks extremely doubtful.

In summary, it does seem that there is no reason to panic, at least not yet. What consumers should bear in mind however, is that we are closer than ever to the stage when interest rates will rise, whether quickly as a consequence of uncertainty and unrest, or slowly as a natural consequence of economic progression.

Either way, I do not expect that fixed rates will be as low as they are now towards the end of this year, so many people who are concerned about rising rates, who have “won” on a variable rate for the last year or so, are now thinking of quitting whilst they are ahead and opting for the sanctuary of a fixed rate.

The next few days will of course be crucial, but the leaders of the respective parties have an opportunity to act in the interests of the country and restore faith, or continue their stubborn ways and risk the wrath of voters for many years to come.