Speaking to Mortgage Solutions on Association of Mortgage Intermediaries’ (AMI) 10-year anniversary, chief executive Robert Sinclair (pictured) said the trade body had made several key achievements and witnessed dramatic change in the mortgage market.
AMI was founded in 2003 and was previously part of the Association of Independent Financial Advisers (AIFA) but became a separate entity in 2012.
The MMR, which was proposed in 2009 and came into force in 2014, fundamentally reformed the mortgage advice market, requiring tighter qualifications of sales staff, tougher rules on affordability and interest-only mortgages and a ban on self-certification mortgages.
He said: “Working to try and get the right angle [and wording] was really important, we were all lobbying and having rows about what the right answer to the problem was.”
He added that while it had brought in the “pain of the stress test”, looking back it had “served us well” and was a “real positive”.
Sinclair noted: “If we had thrown the kind of money that’s been thrown at the mortgage market by government through the [health] crisis, if there hadn’t been stress testing god knows what house prices would be now.”
He continued that another key area the trade body had worked on was talking to the EU Commission on how to structure legislation so it “would not fundamentally damage the UK mortgage market”.
“We wanted to give time and flexibility around ESIS implementation, so lenders had time to make the changes and so they did not have to invest a huge amount of money quickly,” he said.
He said it was very challenging as it was “trying to build something that fits 27 countries, 26 of whom do not have intermediaries”. He said in other European countries, mortgages and insurance were typically it was done by direct selling rather than through mortgage brokers.
He added that another key achievement the trade body had worked on a was document called “Working Together”, which was born out of Treating Customers Fairly work done with the Financial Conduct Authority (FCA) and its counterparts. It defined the rules and responsibilities of the lenders and brokers.
Sinclair said: “It was a huge piece of work. The hard work wasn’t getting it published, it was getting everyone around the table to discuss it and agree.”
He said the document went through six iterations before it got agreed, partially because participants were “taking it back into their firms and talking about it”.
Another big achievement of the trade body was helping to change the funding structure of the Financial Services Compensation Scheme (FSCS), so mortgage brokers were moved from the pensions class into the general insurance class.
He said the change had saved mortgage brokers around £500m over the over seven or eight years since the change was made.
He added that another “big win” from that consultation was making lenders must pay for 25 per cent of home finance intermediation claims.
“Not only did it mean that they had to make a financial contribution, but it also focused their minds to actually manage their distribution better otherwise there’s a penalty for it,” Sinclair said.
Sinclair added that in 2019, the FCA had removed around 100 mortgage brokers, and the industry had continued to do so, pointing to Lloyds Bank Group and RBS’ removal of 2,000 brokers partially due to the above changes.
He added that another key aspect of AMI was to build relationships between lenders and brokers. Sinclair said in other fields like insurance and investments, “brokers” and “lenders” in that space were “almost like enemies”.
However, he said whilst this had been the case to a certain extent in the mortgage market, especially before and during the financial crisis of 2007 and 2008, the market had “transformed”.
“That’s been really important for us over the last decade, that we’ve tried to work in partnership with the lenders and look at what’s best for the industry and best for the customer as opposed to just worrying about what’s best for us. It’s about forming an allyship and support as opposed to fighting.”
Biggest challenges
Sinclair said the three big “knotty problems” with the regulator looking forward were the FCA looking into consumer duty, the future role of networks, as well as potential changes to the FSCS.
He said AMI was taking part in the FSCS consultation again and would push for lender contribution to be 50 per cent so it was equally split between lenders and brokers.
From a government perspective, he said the cladding crisis was still an “absolute disgrace” and AMI was “staying close with the discussion” by talking to UK Finance, Building Societies Association, Association of British Insurers and the Royal Institute of Chartered Surveyors.
However, he added that these parties, along with the government, were the people who make “fundamental changes”.
“The lenders know what the issue is, as do the surveyors and the insurers. The broker or consumer viewpoint is not going to change the real mechanical issues that they’ve got of who takes responsibility, who pays and who sorts it,” he said.
Sinclair said leasehold reform was another key issue, and although progress had been made on escalating ground rents more needed to be done.
He said later life lending would also come under scrutiny as the population was ageing and assets would increasingly be needed to fund peoples’ retirement because pensions would be insufficient to maintain their current standard of living.
He added that many pension funds were also the funders of later life lenders and said there was a “big drive” into the lifetime mortgage market.
He said over the past three or four years there has been “more money chasing [fewer] consumers than they have funding for” which he said was “relatively unusual”.
“We have more supply of assets looking for a borrower, and that’s never a good place to be,” he said.
He added that from a consumer perspective, he would estimate that around 90 per cent of people considering lifetime mortgages or later life lending could be vulnerable and he didn’t see evidence of that being accounted for in current processes.
Sinclair said: “My worry is that the industry has continued to hide behind ever escalating and tightening standards coming from the Equity Release Council, which gives them a comfort but if they tick all the boxes, I’m set. That is nowhere near where they need to be.”
Sinclair said the association’s Viewpoint report, which surveyed attitudes and experiences to diversity and inclusion in the industry, would also hopefully lead to some notable changes.
He said 45 people, from both broker firms and lenders, wanted to work with the trade body on carrying through changes as a result of this. He said there would be three working groups who would work on actions.
“It’s really about not letting any of this go. It’s about making sure that having created this level of interest and opened up the debate you still allow this debate to happen in a climate of safety and inclusivity,” he said.
He added that it was fundamental that white middle-aged men were also involved in diversity and inclusion efforts, otherwise change would be stymied.
Sinclair said: “It is fundamental that you’re inclusive and that you’re seen to be wanting to be part of this, otherwise it becomes it becomes the minority fighting against majority still. If it’s a minority working with the majority, it becomes inclusive.
“There are no silver bullets. There’s no easy way of doing this.”
