Q) There have been reports that comparison websites could be affected as a result of the MMR proposal to ban non-advised sales. A year or two from now, will there be any information-only sales and comparison websites?
– David Sheppard, Perception Finance
A) I think there is always a place for this although many consumers also want some human interaction and re-assurance that they are doing the right thing. As MMR stands straight online channels with no human interaction are okay, but models that offer a help facility when you talk to a consumer too, will as things stand, require the sale to become advised.
Q) With the latest proc fee changes from major lenders, are we likely to see more brokerages go down the DA or AR route?
– L.F, Amber Mortgage Solutions
A) I don’t think that this is a question of AR or DA as firms will always make decisions that are right for them. In practice for smaller firms the AR route looks attractive, but for larger firms the DA option does give autonomy, but for that to be sensible financially my view is that you have to have critical mass.
Q) Where do you see other mortgage prisoners coming from as a result of the MMR? We already have mortgage prisoners through lenders reacting to this document. Will the full requirements produce more?
– Dominik Lipnicki, Your Mortgage Decisions
A) We see an issue with consumers being trapped in the future all over the place.
Recent criteria changes from lenders have effectively trapped many already and these changes have often carried (from lenders) the stamp of being carried out in the name of regulation and in line with MMR.
The MMR is of course still in consultation, so this is change before rules and in that regard may or may not be driven by MMR, or indeed wider commercial considerations.
Interest-only, lending into retirement, debt consolidation & self-employed are obvious areas of concern and it is clear to me that the implementation impacts are only starting to be understood – if you like, this is the difference between theory and practice.
In the end, the FSA needs to ensure consumers interests are protected in the MMR transitional provisions as until there is greater competition in the market place lenders will be unlikely to go there on a voluntary basis.
Q) What is Patrick’s view on lender’s attempts to dissuade FSA from their default preference for advised sales and do you think that the prevalence of non-advised sales has helped them to develop dual pricing in the last five years?
Conversely, does he think that MMR will reduce lenders’ appetites for dual pricing?
– Stuart Duncan, The Personal Mortgage Service
A) In my view dual pricing is a function of a market with little real appetite to lend. Against that backdrop lenders are looking to try and fill their own expensive direct channels and in some cases this is at crazy rates. When you have some major lenders pricing a 2 year rate at 60BP’s lower than the intermediary product to save a proc fee of 0.35% it is clear that this is not being driven by commerciality, but instead by other reasons.
We are fully behind the move to mandatory advice as we believe that it is in consumer’s interests, this will of course increase costs to lenders in their own direct channels and this may make direct less attractive to some.
Equally, if lenders take up the advice mantra then they may compete more with intermediaries, but let’s be honest they will always be on the back foot as they can only offer their own products whereas a broker can look across the wider market.
Lender’s implementation of MMR in advance is a strange one. On the one hand we are constantly being told by lenders that changes are in line with MMR thinking and the direction of travel regulators are demanding. This is strange as the MMR paper is still at consultation stage, not rule and the FSA has intimated that supervisers are not supervising in line with the proposals.
My view is that it would be very helpful if the FSA came out and made a categoric statement about this so that all market participants could clearly understand what is being driven by the regulator and what is being driven by lender commercial choice. This would also help to ensure that there is no creepage in advance around the edges – the changes in the 2nd CP were very welcome and reflect the fact that FSA has listened, but there are still major issues around the transitional provisions that need a lot more work and robust assessment of implementation impacts on the market – it feels as if this is only now starting to see daylight as an issue.
Q) There has been speculation that all high street lenders will have to abide by new MMR rules on interest-only. But it is thought that private banks will have to apply for a waiver of the rules to deal with high net worth clients. Do you agree with this?
– Paul Welch, Largemortgageloans.com
A) In essence, no. My personal view is that high street lenders will not want to try and re-engineer systems to give a carve out for a handful of HNW customers. This may be more practical for private banks and if those banks were to do this by way of a waiver I would have no major concern. Overall I would rather see no carve outs as someone’s wealth does not dictate their knowledge or capability in mortgages i.e. the street cleaner who won the lottery, or the self made millionaire who knows nothing about our sector.
Q) Is the crackdown on interest-only a result of the MMR or EU regulation on capital adequacy? Instead of lenders changing their criteria on interest-only deals, would it not be better if they just introduced higher rates on these deals instead?
– Ian Gray, Largemortgageloans.com
A) The interest-only crackdown as you put it is clearly an amalgam of these issues and to a degree, the label put on it by particular participants often best reflects the way in which they want to present this and not necessarily the underlying driver – greater transparency would I think be helpful.
Q) The MMR proposal on advised sales could potentially result in huge costs for lenders in terms of re-training branch and call centre staff, making life extremely difficult for some of the smaller lenders in the market. How much of an impact will this have on lending in the future?
– Jonathan Sanders, IP Finance
A) The reality is that lenders will need to decide whether or not they want to set up fully skilled advised sales forces with all that means, or rely more on intermediary business. This is really a lender by lender decision and whilst the organisations size and reach may be a major factor in this decision it is not, in my view, likely to have a major impact on lending volumes.
Q) How come the FSA decided to call their ‘money made clear’ website the Money Advice Service when it doesn’t actually provide any advice? Why are they not helping the consumer understand the difference between advice and information?
– Steve Biggs, APH mortgages
A) That’s a great question and one which I think many people would ask. Many have questioned the value for money of this service and its outcomes, particularly appropriate given that it is the industry that funds the service. I’m all for consumer education and understanding and improving that, but worry sometimes that there is insufficient clarity of purpose and robust enough cost benefit analysis underpinning this particular service.
Q) If the FSA are majority funded by the lenders, are they an impartial service? FSA decisions keep falling in the lenders best interests rather than the consumer’s best interests. Is this because the FSA are funded by the lenders?
– S. Biggs, APH mortgages
A) I don’t think that this is so much a matter of funding as that is compulsory, but more about the very difficult set of priories facing regulators. If you think about it there are conflicts everywhere, not least of which is the dilemma of re-capitalise but lend more, or don’t lend irresponsibly and treat customers fairly etc.
Q) Is the changeover from FSA to FCA the start of more changes down the line on future regulation?
– D. Sheppard, Perception Finance
A) The change from FSA to FCA is significant and clearly the new entity will want to forge their own place in the overall regulatory architecture. It is clear that our industry, along with others can expect more intrusive regulation in the future than we had in the past. But I hope that by the same token firms who operate with good practice will see some sort of regulatory dividend as we move forward. I am a great believer in punishing poor behaviour and a big believer in recognising good, so if I had a dream it would be that we would see this creeping into regulatory thinking too – I’m sure it would drive better overall outcomes.
Thank you so much to Patrick and all our readers for taking the time to join us for our MMR webchat today. And make sure to look out for more features to come in our Regulation Week!
