News Review: Property
Regulation threat to market ranks above the rest by
Nigel Stockton, financial services director,
Countrywide
much has been said about the property market in the news over the past month with mortgage arrears increasing for the first time in two years, conflicting views on house prices and future base rate increases all contributing to a serious sense of wide-spread market uncertainty. However one of the biggest
drivers for future mortgage headlines is the topic of industry regulation. the Financial Services
authority’s designs to review the regulation of both lenders and brokers did at one time look set to signal a complete overhaul in the way retail financial products would be regulated. a low-key FSa announcement in december to defer the introduction of changes to the approved persons’ regime to 2012/2013 has not taken the sting out of the mortgage market review, with both the Prime minister and housing minister speaking out about their concerns. i’ve sat on both sides
of the fence and with my broker hat on there is no doubt in my mind that the FSa needs to act fast to digest the consultation
responses
received and provide some clear guidance on both its short and long-term intentions for mortgage regulation.
Competition compromise to be frank, there will be many
lenders out there taht are quite happy with the current market and the prospect of increased competition, a key outcome outlined in the mmr, isn’t going to be something that they will actively support or embrace. ensuring all customer-
facing sales staff (including branch-based
lending
advisers) have individual registration for professional qualifications and are trained to comply with any new affordability and suitability standards, has serious cost implications for lenders. in fact, if the FSa isn’t careful, enforcing some of the key mmr proposals could create barriers for new lenders to enter the market. this is a shared concern among many brokers and will not act in the best interests of consumers.
Key concerns Feedback from the broker community has also highlighted some fundamental concerns about the mmr proposals. Mortgage advice: make no mistake, in my view, mortgage advice should be the default option for all customers. advice is especially important for those deemed to be higher risk cases, such as first-time buyers or those considering interest-only or term-into- retirement products. Affordability and suitability: We feel these go hand-in- hand and as such affordability should continue to be an integral part of an adviser’s requirement to assess the suitability of the advice that they give. consumers are unlikely to benefit if brokers were to stop
6 mortgage introducer APRIL 2011
assessing affordability and this responsibility was left to lenders. in fact if this were to be enforced we can foresee many lenders making brokers responsible for assessing affordability, regardless of the FSa rules, through lender/ introducer agreements. Appropriateness test: this is a good idea in principle for advised or non-advised sales but informed customers should be given an opt-out. “Restricted” and “independent” advice labels: this is definitely one proposal that is a key concern for brokers. We agree that customers need to make informed choices about how and where they seek products and services but the “restricted advice” label doesn’t do the broker community justice. Will lenders be asked to clearly disclose that they are single- tie and using only their own limited range of products? Professional
KFi documents to ensure any future changes have the crystal mark from the Plain english campaign and include the impact of rolled-up fees so it can be used for comparison purposes.
Consultation is paramount in many ways there has never been a better time for the mmr – it has caught the attention of the industry, politicians and the press. the FSa should see the press attention as a good thing and capitalise on the current interest by using the industry’s consultation responses to carefully review each of the proposals. Furthermore let’s not forget
standards:
We believe that common professional standards across the mortgage market would benefit both sellers and customers alike. However the current list of appropriate examinations should be revisited more frequently and where possible improved. The introduction of a second KFI: Why? if we’re being brutally honest there is widespread acceptance within the industry that the KFi document, in its current format, is not generally read or understood by consumers. adding any kind of second document seems to therefore be an ill-conceived solution. rather than creating a record template, a more effective approach might be to undertake a review of the
that the mmr isn’t the only form of regulation trying to put right the wrongs of the past. it is of equal importance that we also get a clear understanding of how mmr complements the forthcoming european legislation, which is also attempting to create an even playing field for brokers and lenders for the greater good of customers. on the one hand europe appears to champion the role of intermediaries but there have been reports to suggest that brokers could be forced down an advisory route while lenders will not, which concerns me. another key concern is
how the europe legislation would be interpreted on uK soil – could it spell the end of broker commission akin to the retail distribution review-style rules? only time will tell as to whether the mmr consultation responses put forward will influence the FSa’s decision making process.
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