Warren Davis Building Societies Association 31 October 2012
Unsurprisingly the final Mortgage Market Review (MMR) package does not differ substantially from the proposals contained in the last consultation almost a year ago.
That proposed package of reforms was broadly sensible but further clarification was required in a few areas. Much of this has been forthcoming in the final rulebook and provides some much needed clarity to lenders.
While non-advised sales will no longer be an option, other than execution-only sales in limited circumstances, lenders are now much clearer about when advice is required and what that advice must consist of. The well trailed proposals for interest only loans and the affordability and income verification proposals form part of the final rulebook unchanged.
I remain to be fully convinced that a move to a virtually fully advised mortgage market is really warranted. I think if, as the FSA has stated, a number of mortgage borrowers believe they have received advice when in fact they have been through a non-advised process, then this could have been adequately dealt with by small changes to the disclosure regime. The fact that customers mistakenly believe that they have had advice does not necessarily mean that they are on an inappropriate product or that they have suffered any detriment. Having said that, the clarity provided in the final publication now gives lenders sufficient detail in order to determine their future distribution strategies and train and recruit staff.
The next stage on the MMR journey is the handover of responsibility for the implementation of the new regime from the FSA policy team to its supervision arm and ultimately to the Financial Conduct Authority (FCA). Clearly there will be a lot of new learning for the supervisors tasked with carrying out the implementation of this new regime.
It is vital that lenders have the confidence that the next 18 months will see their activities being judged solely on the current regulatory regime. It is equally vital that that when the new regime is implemented in April 2014 industry is clear how the rules will be supervised and enforced. Any lingering uncertainties could lead to a conservative approach being taken by lenders until the supervisory regime becomes clear. This could, if not managed carefully, result in a further, unnecessary and unwelcome contraction in mortgage lending to certain groups of prospective borrowers.