Tackling the issue in Market Watch this week are:
Alex Revell, policy analyst at AMI
Lucy Widenka, personal finance campaigner at Which?
Mike Fitzgerald, sales director of the Emba Group
Alex Revell, policy analyst at AMI
Yes, there should be a full re-consultation.
The MMR has already seen the FSA produce one discussion paper, three consultation papers and one policy statement.
Areas where the FSA was confident to push ahead, such as individual registration, have now been delayed until after 2012/13, with the reason for this delay being unclear.
By dividing the MMR into various consultation papers, the FSA has prevented the industry from being able to fully identify the impacts and costs of the MMR. This has also masked how the proposals will affect the complex inter-relationships between the regulations within the industry.
The FSA needs to establish which of the proposals will produce the most significant gains.
By considering the menu of options, the FSA can then measure whether adding each proposal to the final consultation will deliver sufficient gains to justify its inclusion. Applying all the options considered in the consultations would be regulatory overkill.
The proposals made bythe FSA are highly inter-dependent and they cannot make changes in any one area without considering what related impact this may have on its other proposals, the resulting draft rules and the mortgage market.
In parallel, the European Commission is also undertaking its own review of the mortgage industry across the EU.
Depending on the legal structure adopted by the Commission, this work could result in the FSA having to reconsider its proposals if they are at odds with any European regulation.
Once the FSA has a decisive set of proposals, it should publish a final consultation. This should include a full set of draft rules, cost benefit and impact analysis.
Only by providing this conclusive consultation can our industry start to understand how the MMR will really impact on consumers, intermediaries and lenders.
Lucy Widenka, personal finance campaigner at Which?
Which? supports the need to reform the mortgage market and believes more needs to be done to ensure responsible lending.
However, a balance needs to be struck between reining in some recent lending practices and ensuring continued access to mortgage credit.
The current debate around mortgages is being polarised into ‘pro’ and ‘anti’ MMR camps, undermining the need for balanced and constructive discussions to secure reasonable measures to protect consumers and ensure a stable mortgage market going forward.
For the MMR to be successful and truly beneficial for long-term stability of the mortgage market, it needs to address the issue of existing mortgage customers.
There are particular problems for existing borrowers at high LTV, many of whom are trapped on their lender’s SVR. Our research has also shown a significant reduction in mortgage offers for borrowers with a 90% LTV deal and virtually no offers for LTVs above 90%.
The FSA must not allow lenders to use its proposals in the MMR as an excuse to force existing borrowers onto high interest SVRs, justifying this with the high risk posed by such customers.
Where lenders agreed to lend to such borrowers, they should be required to continue lending to them at rates that are comparable to those they were offered for the original loan.
It is also important to remember that there are wider macro-economic issues affecting the mortgage market.
Mergers and takeovers have led to an increase in the concentration of major lenders, with the number of customers able to switch lender declining significantly, weakening competitive pressures to keep rates low.
Any discussion about the MMR needs to be set within this wider context.
Mike Fitzgerald, sales director of the Emba Group
The continued debate on the FSA’s MMR rumbles on. Hardly a day goes by without an article by one group or another complaining about the effects it will have on the mortgage market.
The first to complain were brokers and lenders, who said that the MMR would have a detrimental effect on consumers and help to subdue lending for a long time.
The industries were asking why even more rules were being put in place at a time when the mortgage market was dying on its feet. The FSA replied that it was just a discussion paper and that it would listen to all points of view before acting on the proposals.
However, within a few months it was being widely reported that some lenders were complaining that pressure was being put on them by their FSA supervision team to adopt some of the draft MMR rules.
As the debate continued, several MPs have come out strongly against the MMR proposals and these include the Housing Minister Grant Shapps and Treasury select member George Mudie.
The opposition has continued to grow and recently a chief executive of one of our largest lenders said that the FSA had not done a full economic assessment and did not seem to understand what the full implications would mean for both borrowers and lenders.
With so much opposition to the MMR, it would seem to be sensible to defer any decisions on implementation until a full and detailed cost-benefit analysis has been done.
In addition to this, the FSA must realise that rushing in new rules will only help to hamper a recovery in the housing market.
