It is clear from the new rules that brokers are responsible for the advice they give to consumers and lenders are responsible for affordability. Hats off to the FCA, all lenders and all brokers for the way they have implemented the MMR changes, as there appears to have been little systemic market dislocation since MMR was introduced.
However, the industry as a whole needs to look carefully at the impact MMR is having on lower income earners, where small affordability issues have the most impact on the amount they can borrow.
Yes, lending volumes have fallen over the past month but there are a few reasons for this. The small downturn variances in volumes are partly due to consumers having to come best prepared for their mortgage applications; this includes the need for them to bring a range of documents, including anything that could affect their credit rating.
The consumer’s second appointment is lengthy, with a full income and expenditure check. In the main, first-time buyers and home movers accept that this is what needs to be done and they are comfortable that they need to spend two hours with a mortgage adviser in order to get a mortgage.
However, we are beginning to see issues in the remortgaging sector, where these types of borrowers are less happy to attend a two-hour appointment to discuss a mortgage they have already been paying for a number of years.
I expect AMI, the CML, and the FCA to look at this carefully in the coming months and off the back of this we may see a relaxation of the full affordability exercise. Similarly, I expect the lending into retirement and equity release products to be the subject of a similar review in the coming months.
After these lengthy appointments, the extra work for the broker is then in getting the mortgage application in a format that the lender can move it forward. This is taking an extra 60-120 minutes and in turn is slightly impacting the number of customers a broker is able to see.
Remember that screen flow for some lenders has completely changed and this has impacted on the submission of application volumes. Lender service teams are also taking longer whilst they continue to learn the new processes involved and this is in turn is leading to slightly longer processing times.
However, if you had said this would be the position we would be in just a few weeks after launch, I’d have taken it. One thing I do know is that these small variances will be resolved smartly and I expect in three months’ time for us to be operating at full steam ahead.
Nigel Stockton is financial services director at Countrywide
