Q: Will the MMR mean brokers have less time to sell protection?
With the Mortgage Market Review (MMR) rules coming into play on 26 April, how many of your current clients and prospects are aware of what the new rules mean for them?
The Financial Conduct Authority has recently sent out a bunch of leaflets through mortgage lenders, informing customers where they can go to get advice and how the new affordability rules will affect them.
Despite articles in the personal finance pages, looking at a number of forums such as Money Saving Expert it seems to me as though there is a lot of confusion and a lack of awareness amongst the public at large. Not surprising really. How many of us are really bothered with understanding the finer detail until we have to?
Unless you have done your own marketing campaign, it’s likely that you’re going to get a lot of questions from your clients as you take them through what is going to become a lengthy process, even for those simply looking to make a change to their existing mortgage.
The interest rate stress test to ensure the loan will pass affordability requirements even if the borrower’s payments were higher is going to prove interesting. I’ve already heard of instances where underwriters have gone back to intermediaries for further information even though the new rules don’t actually apply yet. One intermediary has even reported a case being declined because the client failed to declare a monthly direct debit to charity, a donation which could of course be cancelled at any time.
As lenders are going to need to know the essential expenses your clients have to pay, their basic quality of living costs and repayments on credit cards and other loans, the cost of their various insurance policies will also have to be included in the assessment of their expenditure.
No-one would argue that it’s in everyone’s interests that affordability is properly assessed – lending that could otherwise result in consumer detriment is quite simply unthinkable. However, you’re going to be in the frontline as the industry tries to avoid the intended improvements getting in the way of borrowers successfully getting a mortgage. Some commentators (and lenders if some reports are to be believed) are predicting that decline rates are going to triple.
While you can’t do much to help your clients with many aspects of their day-to-day expenditure, you can help them when it comes to their insurance premiums. Sourcing competitive general insurance deals that meet the borrower’s needs without negatively impacting their overall outgoings when it comes to the affordability test is going to become even more important as you play your part in helping your clients get to grips with the new process.
