But how will this affect channel selection by borrowers?
According to our latest Mortgage Achilles study, 51% of intermediaries thought this change would increase intermediated business. Just 3% thought it would reduce it. The rest – almost half – did not know.
Intermediaries’ main rationale is that giving advice is meat and drink to them but a new challenge for many lenders, who have previously worked on an information-only basis and may struggle to adapt to the new environment.
Tying in with this, our business confidence measure found some intermediaries volunteering the impending MMR rule change as a reason for feeling more confident about the business outlook.
At the same time, though, we found consumers were much less certain of the impact of this change. As part of our study we asked the likely channel choice of mortgage holders intending to seek a new mortgage in the next couple of years. Later, we explained the new rule on interactive sales and asked them to think again on the likely channel choice for their next mortgage.
Hardly any consumers changed their view between these two questions: their first thought was that current behaviour would largely continue under the new rule. Just a handful of potential borrowers revised their channel choice, mostly moving from ‘I will use an intermediary’ to ‘I don’t know’.
So, two different groups, two different answers: which is right? Opinion has not yet formed among consumers – most were not aware of the impending rule change until we explained it in the interview – so their opinions may change as their knowledge and experience builds. The great majority of intermediaries in our study, on the other hand, were aware of the new rule, so their opinions will be more formed but – like most people in business – probably subject to an optimistic bias.
In practice, the rule change is no change for intermediaries but a big change for many lenders. Our best guess is that there will be very little change in channel choice at first. Thereafter, the long-term outcome will depend on how well lenders perform in the advised sales arena and whether consumers come to feel that there is a meaningful difference between ‘lender advised’ and ‘intermediary advised’.
Tony Wornell is director of BDRC Continental
