You are here: Home - News -

Complex and niche mortgages will be broker haven post-MMR – Henry Woodcock

by: Henry Woodcock
  • 17/02/2014
  • 0
Complex and niche mortgages will be broker haven post-MMR – Henry Woodcock
Ahead of the Mortgage Market Review (MMR) implementation on April 26 lenders have been reviewing their policy, process and systems. Henry Woodcock, principal mortgage consultant at Iress, looks at what the changes will mean.

The Mortgage Market Review is nearly here and one of the key questions to emerge from lenders is not whether distribution will change following the implementation – but how? And how will this impact brokers?

The FCA’s intention is for most mortgage sales to be advised, so the emphasis will be on branch, call centre and intermediary interactive sales.

Transactions that were previously available as non-advised or self-service may now require advice or come under the new affordability checks, so applicants and borrowers will need to seek advice through the call centre, a branch or a broker.

Our research shows lenders have stated some 30% of mortgages are already being sold through branches – an increase from the 22% in 2012 – as lenders leverage the investment they have made in their bricks and mortar networks.

For example, for lenders with more than 5% of market share in the mortgage market they have conducted almost a half of lending (47%) through their branches.

MMR restrictions on execution-only sales confirm the view that the FCA sees execution-only as the exception and advice as the rule.

Aside from the High Net Worth and mortgage professional exceptions provided under MMR, some lenders will not allow an applicant to reject advice and proceed on an execution-only basis, as they believe the risk of perceived miss-selling is too high.

Other lenders will allow rejected advice sales to proceed provided there is clearly no customer detriment and the customer can articulate his or her requirement clearly as stipulated in the rules. It seems that we are expecting the general public to be much more aware of how a mortgage product is constructed than has previously been the case.

There are some lenders that are looking to offer execution-only sales online but in this instance systems will need to be both smart and easy to use, while being fully compliant.

Killer questions will be needed early in the process to rule out ineligible applicants and applications.
Applicants must read and confirm they have read the execution-only disclaimer, but questions remain over whether customers will still think they will have some form of redress if it all goes wrong down the line?

However, most lenders are concentrating on getting the branch and call centre ready for April with perhaps a phase two position to offer online propositions later in the year or even going into 2015.

Will the outcome for brokers be feast or famine? In our survey the majority of mortgage sales still took place through advisers (53%) and the intermediary channel proved most effective for buyers, with 62% of their applications going to offer. This compares well to the average across all channels where 43% of mortgage applications do not proceed to offer.

With the more complex mortgage transactions such as buy-to-let, self-build, new build, shared equity, equity release, lending into retirement and converting interest-only mortgages to repayment; prospective borrowers will turn more and more to brokers, not only for advice, but also to source from the whole of market to obtain the best and most appropriate deal.

Although lenders are investing heavily in advised sales channels for MMR, the broker community will remain a crucial component of the recovering mortgage market in 2014 and onwards.

Lenders, perhaps more than intermediaries, will see and feel distribution changes. Intermediaries will continue to play a significant role, and for consumers, the choice of how they buy a mortgage will inevitably be more restricted.

Related Posts

Tags

There are 0 Comment(s)

You may also be interested in