I can tell we are getting close, as I am beginning to imagine the horror stories of people being turned down for mortgages because they spend too much money having fun following Northampton Town from Plymouth to Hartlepool and Southend to Scunthorpe, or maybe that is just me!
We are also seeing reports that many people will not be able to get a mortgage in the future.
This type of story does nothing to maintain consumer confidence in the housing market, and as we have read in these pages recently, a number of lenders have already implemented their changes and the world continues to turn.
I liked the comment made by the FCA when it published its latest MMR readiness survey, it said ‘From 26 April 2014 the industry will have to take a common sense approach to lending mortgages, with checks for every borrower to ensure they only get a mortgage they can afford.’ What could make more sense than lending money only to those that can afford to repay it?
In reality, as the policy has been known for nearly 18 months, lenders have been taking that common sense approach to mortgage lending for some time. In fact, most of them took a common sense approach for many years before that – although as we know there were exceptions. What will be important, particularly in the early days of the new regime is that the FCA also takes a common sense approach, in their case to supervision. There will be applications that sit on the margins of affordability on paper but common sense tells you that the borrower is a good credit risk.
If there are inconsistencies in supervision, lenders are likely to react by taking an overly conservative approach to lending. Then some of the headlines we have seen recently will become a self-fulfilling prophecy, simply as a result of a lack of common sense.
Overall, I don’t believe that huge numbers of borrowers will be locked out of the market, although a million or more will come under the new regime this year. What we may see is a dip in business levels over the next few months while lenders bed their new systems. However as long as the regulator remains transparent and consistent it shouldn’t have a detrimental impact on total lending volumes anticipated for the year.
Paul Broadhead is head of mortgage policy at the Building Societies Association
