It had become clear by the height of the market in 2007 that, while the mortgage market had worked well for many people, it had been a cause of concern for others. The MMR package of reforms is aimed at ensuring the continued access to mortgages for the those customers who can afford them, whilst preventing a return to any poor practices of the past.
Since 2011, lenders and brokers have had time to digest what the new rules will mean to them and their businesses. MMR has marked a new era for the mortgage market and will change the way brokers, lenders and consumers go about the home buying process.
Lloyds Banking Group took a proactive approach to ensure a smooth implementation of the changes required as a result of MMR, many of which were already in place. We have communicated the changes we have made and will continue to support brokers throughout the process to make the transition as smooth as possible.
All lenders have now implemented their changes and, of course, there have been and will be some issues as the new processes and policies bed in, but overall I think it will be seen as a success. The implementation of MMR has meant that a major regulatory milestone has been achieved, and to do this has involved tremendous effort for a very lengthy period of time by intermediaries and lenders alike.
Much of the commentary so far has been on the increase in the length of time an application will take. The key change from a customer’s perspective is that mortgage interviews are likely to take longer. There is a consensus emerging that, for new customers, the average interview will be approximately two hours.
Under the MMR, lenders will continue to take on the responsibility of checking the mortgage is affordable and brokers will have a pivotal role to play in assessing the borrower’s income and expenditure and check this against lenders’ affordability calculators.
Income multiples are no longer relevant when it comes to calculating affordability and lenders will instead use a more thorough and personal approach. This will undoubtedly lead to more paperwork and be more time consuming for all; but the increased scrutiny will ensure borrowers are not taking on more than they can handle.
Mike Jones director of intermediaries at Lloyds Banking Group
