In other words, good customers, who have been diligently paying their mortgage month after month, but who just want to move to a better deal, can be allowed to do so.
We know that movement of this sort of customer between lenders was what the then FSA, now FCA intended by the inclusion of the so called ‘Transitional Rules’.
They told the whole industry this in the run up to MMR – saying in para 3.17 of PS 12/16, “These transitional arrangements will be able to be used by lenders to take on borrowers from other lenders”. But it is not happening in practice. We know of no lender actively seeking to use these arrangements in a positive and constructive way.
Perhaps part of the problem is the word transitional. Normally, this is used to refer to a temporary set of rules, covering how pipeline cases are handled over the period of the introduction of a new set of regulations. But in the case of MMR, no end date for the use of transitional arrangements was given. In fact, they could be a feature of the market for years and years to come.
They are not temporary. They are a permanent simple mechanism to oil the wheels of the market and ensure that customers don’t get trapped in uncompetitive products.
We’ve had calls from parliamentarians for the FCA to provide clear guidance, and indeed encouragement to lenders to get them to start to use the transitional provisions, and it is bound to be a subject which gets picked up in the Thematic Review.
I would hope a few lenders will take a deep breath, don’t wait for the FCA to say something on this, but document their decision and start to offer transitional rules products for new customers transferring from other lenders.
First mover could be a great place to be in this market.
Stephen Smith is Legal & General’s director of housing and mortgage club
