Speaking on a panel at the Building Societies Association’s (BSA’s) chair at the trade body’s annual conference, Emad Aladhal, director of retail banking at the Financial Conduct Authority (FCA), said: “We have a country that has been too prudent in its approach to mortgages. Over 99% of mortgages originated since 2014 are on track.
“You wouldn’t find that in any other type of lending businesses, and I think it’s a debate on where should that percentage be. In an ideal world, 100%, but, actually, if we go to that 100% level or if we keep at the 99%, it means that there are people who are actually credit-worthy, who can afford to make payments, who can have a more secure life, will not get to buy a home.
“In the long term, that will hurt those individuals, and it will hurt our public society in terms of public finances, etc.”
Aladhal did not give a specific percentage but said it was including the question “purposefully for a discussion paper” so it could be debated and discussed with the industry.
Aladhal said the way the regulator launched its strategy last month and the way it launched its latest consultation into the mortgage market “should be a change in how the FCA is approaching, the way we write rules and the way we engage”.
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“We are building and what we’re trying to maintain is a more permissive regime. We… are looking to remove some of these hard guard rails, and to tell the industry that as you are focused on the outcomes you want to achieve for [your] members, that’s what we want you to focus on. That’s how we will measure success.
“In doing so, we will establish a supervisory approach that measure[s] that, and we will lift the things that you perceive to be challenges to innovation. Why is that important to us? Because innovation is necessary to meet today’s needs, to meet customers’ and society’s needs, your members’ needs.
“This is necessary to achieve what our society desperately needs: long-term growth. What I would ask is that, in setting out this consultation… come engage us, feed back and have a conversation with us,” he said.
Mortgage innovation needed but affordability should at ‘forefront’
Sarah Brown, head of mortgage propositions at Coventry Building Society, said the mortgage market has “moved” a lot since 2008 and “we’re in a very different place now”.
“It’s in all our best interests to make sure that, as lenders, we are lending to borrowers’ mortgages that are going to be affordable now and in the long term, and I think that must remain front and centre of all our thinking here.
“What I’m not saying is there isn’t a place for innovation and how we think flexibly about our risk appetite and how we might approach affordability, but we have to do so with our customers’ best interest right at the heart of everything we do.
“It might sound a little bit dramatic, but what we shouldn’t be doing is letting our customers [go] to bed at night thinking: ‘Am I going to feed the kids or am I going to pay [the] mortgage?’
“That should be right at the forefront of the decisions that we’re going to make here. I’m absolutely all for innovation and looking at ways in which we can drive the growth that we’re all looking to achieve, but it has to be done in a sensible, thought-through, sustainable way,” she said.
