CCR2 Customer Engagement
policies, underwriting, systems, and staff training, we also need to be mindful that it could take some time before any new products are in place. Under the new rules, the majority of
customers of inactive firms will have to be contacted by their servicer by September next year. However, it is unlikely that customers with low balances or a short term left on their mortgage, in negative equity, or on an interest-only mortgage with no repayment strategy will benefit from the changes. It will, therefore, be important to consider
how to manage the risk that some may customers be given false expectations that they will be able to secure a new mortgage. We will continue to work with the
regulator’s implementation group as the new rules are rolled out. But however hard we work, there will be
a large number of customers of inactive firms who will not be helped by the new rules. And the FCA has recognised that many of these customers currently sit outside their regulatory protection. So we urge the incoming government,
of whatever political persuasion, to ensure that all customers, regardless of owner, are treated fairly.
Libor to Sonia transition This brings me to another key topic in our conversations with the regulators and government, the transition from Libor to Sonia. Libor underwrites around $300tr worth of contracts worldwide, from complex derivatives to homeowner mortgages. At present, panel banks have agreed to
continue to submit to Libor until the end of 2021, to enable time for the market to transition to an alternative interest rate benchmark. But the UK regulatory authorities have
set a deadline of the end of 2021 for the transition away from LIBOR and have strongly suggested that no new LIBOR linked contracts should be written from the third quarter of 2020. The transition to Sonia over the next
few years will be a huge systemic change. So it is vital that firms begin putting plans in place now. UK Finance is dedicated to supporting the industry in meeting the end-2021 deadline.
December 2019 Further clarity from the regulator about
We expect to see papers from the Risk Free Rate Working Group set up by the Bank of England and FCA in the next few months on how to deal with legacy cash products, on a credit spread adjustment and on the need for a term rate
But a number of pieces of the jigsaw need
to be put in place for firms to make key decisions about the transition. We expect to see papers from the Risk
Free Rate Working Group set up by the Bank of England and FCA in the next few months on how to deal with legacy cash products, on a credit spread adjustment and on the need for a term rate. Legacy contracts undoubtedly pose a
challenge. Firms may take a range of approaches in choosing how to move these customers to an alternative rate. UK Finance has published a toolkit for
its members to help them think through the decisions they need to make. The key consideration for firms will be acting in their customers’ best interests and ensuring that any changes made are fair to customers.
www.CCRMagazine.com
their expectations would be helpful. In some cases, we believe that there may need to be specific regulatory or legislative intervention to support consistent and fair customer outcomes. We are also working closely with regulators,
other trade associations and other industry stakeholders on strategies to communicate these changes to customers.
Conclusion The mortgage market has changed significantly over the last decade, shaped by regulatory, political, and economic drivers. This has had an impact on our housing market too. The research we are trailing, carried out
with Zoopla/Hometrack, will provide an evidence base of the current size and shape of the mortgage sector and its intrinsic links to the housing market. Given that Parliament was dissolved last
night we will not publish the full report until after the election. We want it to act as a springboard for
considered, measured policy and regulatory debate about the market of the future we want to create. And we stand ready to be involved in that debate. CCR2
Edited from a speech given at the Annual Mortgage Conference 2019.
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