The Analysis Editor’s Letter


Perspective is everything


Stephen Kiely Editor, CCRMagazine stephen@ccrmagazine.co.uk


Sometimes, differences in perspective can lead to some very different analysis of the same data. And so it was, last month, with the Financial Conduct Authority’s (FCA) thematic review into the fair treatment of existing interest-only mortgage customers. The FCA itself said that it was “concerned


that shortfalls in repayment plans could lead to people losing their homes” after research found that nearly one in five mortgage clients had an interest-only mortgage. Also that, although mortgage lenders were


writing to customers prior to their mortgage maturing, engagement rates with firms were low. Jonathan Davidson, executive director of


supervision – retail and authorisations, said: “Since 2013, good progress has been made in reducing the number of people with interest- only mortgages. However, we are very concerned that a significant number of interest-only customers may not be able to repay the capital at the end of the mortgage and may be at risk of losing their homes. “We know that many customers remain


reluctant to contact their lender to discuss their interest-only mortgage for a variety of reasons. We are very clear that people should talk to their lender as early as possible, as this will give them more options when it comes to the next steps they can take. “We are encouraged to see that lenders


repayment was reduced, the processes, which customers had to follow, were, on many occasions, challenging. This included delays in getting to speak to advisers, making multiple telephone calls and repeating information previously provided. However, on the other side, reacting to


the same figures, Paul Broadhead, head of mortgage policy at the Building Societies Association, struck a more upbeat tone. “Today’s follow-up from the FCA on


interest-only mortgages paints a broadly positive picture in which lenders are taking action to engage with and help customers with this type of mortgage,” he said. “The objective, since 2013, has been to


acceptance of other points of view, that we can hope to make real progress


preconceptions, and upon the


rather tolerance


than and


have taken positive steps to engage with and help their interest-only customers. However, as the number of maturities start to increase towards 2032, it is important that lenders take time to review and, where possible, improve their own strategies.” The FCA found that lenders were actively trying to communicate


with their customers to understand repayment strategies and to provide appropriate and affordable solutions where needed. However, for most lenders, this engagement was based on writing to customers at specific times before maturity. Where lenders tailored their work to the different customer types


identified, they were able to increase contact with those considered higher risk. The FCA also found that, although lenders were recommending


repayment options that appeared appropriate for those customers who made contact, and that the harm of repossession due to non-


March 2018


It is only by understanding this fact, and by taking part in truly constructive dialogue based upon facts


discuss alternatives with borrowers who risk being unable to repay their mortgage at the end of their term. For those who have yet to engage, we welcome FCA clarity that the onus is on the consumer to respond to contact from their lender. The onus is on us, as lenders, to ensure that we are easy to engage with. “The proportion of


interest-only


mortgage balances has steadily fallen in the past few years. Overall, the product has worked well for most borrowers. “The initial FCA research found that nine


in 10 borrowers, with an interest-only mortgage set to mature by 2020, had a repayment strategy in place. Since then, the


FCA has accepted that some interest-only products, such as the retirement interest-only mortgage, on offer from some building societies, have an appropriate place in the market. “In this latest review, we welcome the FCA’s clarification of


available options for interest-only mortgage customers regarding early repayment of their mortgage.” So which of these approaches is ‘the truth’? In reality, despite


modern society’s intense desire for right-or-wrong answers, the world really is made up of finer margins, and it generally comes back to a question of perspective. It is only by understanding this fact, and by taking part in truly


constructive dialogue based upon facts rather than preconceptions, and upon the tolerance and acceptance of other points of view, that we can hope to make real progress. Enjoy the magazine!


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