considering the impact they will have on the market. We want to return to common sense standards.” And in an interview with the Financial


Times last month the regulator’s chairman, Lord Adair Turner, said: “What we are trying to do with our mortgage conduct [consultation] is make the mortgage market better in 10 years’ time, not really to change what’s going on today.” Whether good outcomes for the


market will be achieved remains to be seen and while this paper has prompted a cautiously optimistic response from the industry, it is worth remembering that it is one of three consultation papers still to be hashed out.


AppropriAteness Perhaps the most influential of the measures announced in this CP is that brokers will not have any responsibility for assessing affordability, though they will have to consider the appropriateness of a product for the borrower. “We continue to see a very important


role for the intermediary in the UK mortgage market,” said Nicoll. “We are concerned about blurring the


line about who is responsible for assessing affordability... Our view is that intermediaries do have a role to play in assessing affordability, but we are considering that it should be limited to checking whether the borrower fits within the expected parameters of lenders’ affordability criteria.” While initial responses to this have


been generally favourable, the specific definition of appropriate is still vague – something which is causing concern in the industry. The FSA defines it as “ensuring the product meets the consumer’s needs and circumstances” but Andrew Baddeley-Chappell, Nationwide head of mortgage strategy and policy, raises an important question. “The paper itself was a relatively


balanced statement of the issues, but the problems come not when you try to understand the issues, which are genuinely accepted, but when you try to use conduct of business regulation to


stop bad things happening,” he says. “This paper raised the issue of


appropriateness, but the really interesting question is what does inappropriate mean? Does it mean with hindsight it turned out not to be a good thing? “That’s the issue. It’s a hard, subjective


decision. It’s easy to see where things are appropriate and it’s easy to see where things are inappropriate, but there’s a big bit in the middle where it’s a more judgemental view.” Iain Laing, chief credit officer at


Santander, says in practice brokers will still have to look at affordability in order to be able to assess the appropriateness of a product.


“PERHAPS THE MOST INFLUENTIAL OF THE MEASURES ANNOUNCED IN THIS CP IS THAT BROKERS WILL NOT HAVE ANY RESPONSIBILITY FOR ASSESSING AFFORDABILITY”


“Regardless of the FSA’s requirements,


I suspect we will continue to require brokers to validate a customer’s income and assess affordability,” he says. “It’s hard to imagine how you can give appropriate advice to a borrower without these basic steps.” Andrew Montlake, communications


director at London-based broker Coreco, thinks this latest raft of proposals will hit the bank-based advisers disproportionately. “I would have thought appropriateness


assessment is what decent advisers do anyway,” he says. “But the impact on branch staff will be interesting. If you’re in branch – will you have to say there might be better deals out there via a broker?


Whole of market should mean whole of market – there’s a lot of confusion at the moment.” Rob Killeen, business manager, at


City-based broker Capital Fortune, thinks the FSA doesn’t go far enough. “A product may be appropriate from


those available, given needs and circumstances. It does not however, mean it is suitable. If the FSA is serious about consumer protection they should insist that all customers have the right to benefit from advice on not only an appropriate product, but “the most appropriate” product available,” he says. Dominik Lipnicki, director at


Peterborough- based broker, Your Mortgage Decisions, thinks the regulator’s decision not to make advice mandatory for borrowers could be hasty. “Whilst of course freedom of choice


does remain important, considering previous research which showed consumers tend to assume they have been given advice no matter what the sales process - I would have preferred the FSA to promote independent mortgage advice more.”


LeveLLing the pLAying fieLd While the FSA has opted to propose that both advised and non-advised sales stay in the market, much of this paper does suggest that it wishes to level the quality of the mortgage sales process across the board. Robert Sinclair, director of the


Association of Mortgage Intermediaries, says that with the creation of a level playing field for the industry the proposals may drive up the cost of banks delivering mortgage products direct. “This would be good news for


intermediaries who could see a rise in demand from lenders,” he says. “And good news for consumers who value the independent advice they receive when applying for a mortgage.” Peter Williams, executive chairman of


the Intermediary Mortgage Lenders Association agrees with Sinclair. “Although the FSA indicates the paper


mortgage introducer DECEMBER 2010 23


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