Lynda Blackwell (pictured), manager of mortgages and mutuals at the FCA, issued the caution at The Mortgage and Protection Event in Birmingham.
Blackwell said broker firms need to plan now for the increased pressure on their services by putting in place enhanced systems, procedures and checks so they would not fall foul of regulation.
“Demand for advice is high and it’s good to see intermediaries busier than they have been for some time. There are even questions being asked about whether there is sufficient capacity in the market to cope with increased volumes,” she said.
“And I wouldn’t be the regulator if I didn’t introduce a note of caution about this. In the past we saw some firms cutting corners in order to cope with higher volumes. So it’s just something to think about.”
The intermediaries’ share of the advice market has risen from 55% in 2012 to 61% in 2013 and 65% at the end of June this year. The Association of Mortgage Intermediaries has predicted this will rise to 75% within the next five years.
Borrowing into retirement is one area in which Blackwell said intermediary advice played a valuable role.
Blackwell said the broker’s share of the lending into retirement market had stayed consistently high since 2008 and had increased to more than 70% in the last quarter.
Mortgages which will mature for borrowers between the ages of 65 and 70 have increased from 21% of all mortgages in 2008 to 31% in the last quarter.
There has also been a steady decline in the number of borrowers who will be under 60 when their mortgage comes to an end. Lenders are allowing borrowers to stretch terms so the mortgage payments fit the lenders’ affordability assessments.
“Longer-terms are not necessarily bad things,” said Blackwell. “What matters is that the borrower understands very clearly what taking a longer term actually means so they need to understand the real costs to them in terms of the longer interest payments they need to make and the extra early repayment charges if there are any.”
