Interview - Paul Broadhead

The mortgage market and individual protection were for much of the past ten years symbiotic, with sales of protection heavily linked to the mortgage boom.

While many advisers - where selling mortgages was their main form of income - were very poor in terms of promoting protection, the crash in the mortgage market put a major depression on protection sales.

Although, this was mitigated in part by mortgage advisers switching to protection as their main business dried up.

So sitting in front of Paul Broadhead, head of mortgage policy at the Building Society Association (BSA), it would be remiss of any interview to not begin with: "Do you see the general mortgage market recovering to a point where you can say ‘That's a healthy market' any time soon?"

That depends on what the expectations of a healthy market are. If that is where we were in 2006-07, probably not.

Broadhead said: "For that five years in the middle of the past decade, we saw an average net of £102bn a year being lent.

The year before last, was £10bn and last year was £8bn. We will be sticking around that kind of number, probably for the next couple of years.

"Households are deleveraging, businesses are deleveraging, funding is tight, regulations are getting far stronger, and nobody really knows what a healthy market might be."

2007: A FINANCIAL ODYSSEY

It is fairly widely known that the mortgage market crashed as the wholesale market and the securitisation market, which was funding a lot of the lending in the run-up to 2007, stopped as the extent of contamination by US sub-prime lending, in so-called AAA securitisations, became clear.

However, in the past year, we have seen more finance in the market and a number of organisations have managed to complete securitisation deals.

The problem is that, going forward, the game has changed.

"The regulator is keen to see more lenders funding more mortgages from retail deposits," said Broadhead.

"That market remains incredibly challenging because not only have you got more competition for people's retail deposits, you have to do that in an environment where interest rates are historically low and incomes are squeezed - so if people have got money to save, there's not a great deal of incentive for them to do so.

"That feeds through to the mortgage lending figures, which are still about 90% lower than they were in the middle of the decade.

Not just on the peak year, but on the average of the five years in the middle of the decade."

A feature of this sea change is that the lender market is fracturing, with larger players looking to reduce market share.