Speaking at a Westminster Business Forum event on the UK mortgage market, Morgan said innovation in mortgage lending was now three to five years behind where it could have been.
Morgan, who is chief of staff to the personal and business banking CEO at Royal Bank of Scotland (RBS), said the UK regulatory environment has been one of fear since the Mortgage Market Review (MMR), both among firms required to comply and front-line staff should their words been mistaken for advice.
Morgan said: “The biggest impact I’ve seen post-MMR is among certain customer cohorts and apparent lack of innovation in the market, both from a product perspective and how we transact mortgages. There’s a real lack of digital innovation in the mortgage world which was apparent pre-MMR but it’s certainly lagging behind the rest of the banking sector and other UK industries.
“The UK regulatory environment has been one of fear in recent times, as there’s fear from firms to comply, especially among those banks that have failed previously. There is also a fear regarding what we should tell our front-line staff. Is it the regulatory framework or is it the bank’s interpretation of those rules, I think it’s a bit of both… It does seem we’ve been moving against the grain of consumer demand,” he added.
Banks need to comply with regulation but must also be willing to take appropriate risks, which could create further opportunities for underserved borrowers, Morgan said.
“A better middle ground would probably be a part-advised process empowering advisers to put some of the decision-making back on the customers and still be able to have a conversation. This could create further clarity for lending criteria, reduce the overall cost to lenders and by reducing the overall cost could open up resources for some of the niche markets that are losing out.
“In the end it comes down to risk appetite from the banks. The regulator needs to help create that appropriate risk-taking environment, which is what they’ve tried to do but unfortunately someone always loses out.”
