Robertson: The CML has been in discussion with the Financial Conduct Authority (FCA) about the unintended consequences of the MMR. What are the issues still to address?
Smee (pictured): We are still putting the list together, as the consequences tend to come out bit-by-bit. There is concern at the moment about the difference between committed and non committed expenditure, although I think that is easily resolvable. There remains the question of whether the MMR is friendly to a digital channel but the biggest issue, which we will be taking up at the end of this year or the beginning of the next, is the question of product renewals. Things like switching the product which is subject to advice but which a lot of people think takes an unnecessary amount of time as the person is already a customer. We don’t think the regulator has got that right.
Pension reform is giving older people more choices yet the criteria for borrowing undermines older borrowers. Lenders’ age criteria forces people towards equity release and there are restrictions on sources of income. Are you doing work to specifically update that criteria?
We are saying to the FCA that their retirement rules need to be looked at again in light of the changes in the annuity markets. It is something people are very cautious about but the regulator needs to have a root and branch look at the way it treats retirement in the new circumstances. I believe this is so fundamental a shift that I just can’t see the regulator ignoring this.
You are known to be keen on the coming together of equity release and the mainstream mortgage market. Do you see that happening?
What I see is better bridges between them. At the moment they sail along parallel lines and I think the bridges between them will become increasingly important, particularly in light of annuity rules. We need to facilitate these markets to talk to each other, to communicate, in order to lead to better outcomes for consumers.
The FCA talks quite extensively, yet is known not to talk as much to brokers. What is your opinion on that?
I think it does talk to advisers. It has good relations with AMI [Association of Mortgage Intermediaries] and with a lot of the major players who sit around AMI’s board table. One of the problems, and I speak as somebody who has run industry trade bodies in my past life, is that the FCA doesn’t get round to see all intermediaries and so intermediaries think they are being excluded. I don’t think the FCA gets around to talking to all lenders to be honest with you.
I think you will find that there are various channels open and this question emphasises to me the importance of strong, well resourced trade bodies like AMI that can fight their corner.
When it comes to the regulation of the buy-to-let sector, what would you like to see and what do you expect to see?
We have this very strange EU provision and the strange introduction of consumer buy-to-let that the government has decided is necessary in order to meet the requirements of the mortgage directive.
We are also developing a statement of best practice which states what lenders should be doing in this market. That is a way of ensuring that there will be no need for external regulation of consumer buy-to-let.
I think the buy-to-let market is under scrutiny, we saw the Bank of England last week talking about whether there should be various limits placed on the market and I think that generally speaking the buy-to-let market is more in the regulatory and political spotlight than it has been. However, I hope that this is not inexorably linked to the regulation of the market as I don’t think there has been a case made in any way to say that this is necessary. It would be a very big step on very limited evidence.
You mentioned in a Treasury consultation response that you thought there was confusion over what a consumer buy-to-let was?
It won’t be our definition which counts, but basically what they are trying to catch is the consumer. As I understand it you will be asked when taking out a buy-to-let product if this is for business reasons. If you are deemed to be in it for business reasons you will be outside the consumer regulations. The consumer buy-to-let would be a fairly small proportion of the population, I would suggest.