MMR: Rules could incentivise lenders and borrowers to go direct
Share
Lenders and borrowers will be incentivised to use direct-only channels and ditch brokers after the Mortgage Market Review, the Financial Services Authority predicts.
In a blow for brokers the FSA’s final MMR consultation paper says the number of intermediaries is likely to reduce further after the MMR is introduced.
The regulator says that making lenders more responsible for affordability assessments could force them to have greater involvement in the application process.
It states: “By giving lenders the responsibility to verify income and assess affordability, lenders might be expected to become more involved in the application process.
“This could lead them to prefer direct sales over introduced sales. Furthermore, in recent years, there already appears to be a trend towards the use of direct sales forces, irrespective of the proposed rules.”
Previous analysis by Oxera suggests the MMR will strengthen the trend towards direct only.
It states: “Lenders are likely to reduce the number of intermediaries they work with and rely more on their direct sales forces. This might disadvantage smaller lenders, although they would still be in a position to use intermediaries to screen initial applications on their behalf if they find this beneficial, as long as they retain ultimate responsibility to verify income and assess affordability.
“Each intermediary is still likely to have access to a sufficient number of mortgage lenders. Borrowers may face higher search costs to access intermediaries if the number of intermediaries is reduced.”
The regulator does say the strictness of affordability checks could enhance a broker’s value but that it is similar to their current role in the current subdued market.
The FSA adds that moves to force brokers to reveal direct-only deals as part of the advice process make it more likely customers will go direct to branch.
It states: “The requirement for some sellers to disclose cases in which they do not consider direct-only products for consumers may incentivise some consumers to move from intermediaries to direct-only sales.”
If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat
View results 10 per page | 20 per page | 50 per page
Readers' comments (33)
Nick | 19 Dec 2011 8:41 am
Is it just me that thinks the FSA are clueless? Isn't it great for the consumer to get tied advice from an order taker at a bank rather than proper advice from a whole of market broker! Anyone might think that the top bodds at the FSA are getting backi handers from the banks!
Unsuitable or offensive? Report this comment
Bobby | 19 Dec 2011 9:18 am
Thats, that then. Can the last Mortgage Broker to leave please shut the door and turn the lights out. Have a Merry Xmas and a Happy New Year !. 20 years dedication to my profession and clients flushed down the Toilet. Thanks FSA !.
Unsuitable or offensive? Report this comment
John Crisp | 19 Dec 2011 9:44 am
What a load of utter C**P. The public wouldn't know where to start by going direct. If this goes ahead I predict this country will never come oput of recession because the public use their BROKEDR because the vast majority of bank staff - like the FSA - are CLUELESS.If houses are not selling then the economy grinds to a halt, common sense, but then our dictatorship, sorry regulator have absolutely no common sense. Instead of punishing the banks for the mess we are in they are gicing them the whole market to plkay with without any competition.
Unsuitable or offensive? Report this comment
John Steed | 19 Dec 2011 10:02 am
Long waits for appointments. Cluless pooly trained advisors. This is the feedback we have been getting from the market place from people going direct to banks.. However, after 7 years of being hounded to death by excessive FSA directed bureaucracy they have finally achieved their objective. We are closing down next year. It is now impossible to make a living and stay sane in this business.
Unsuitable or offensive? Report this comment
Kevin | 19 Dec 2011 10:02 am
I haven't read it all yet, but presumably the FSA will still be expecting brokers/firms to pick up the tab to the tune of £170m while recommending that we will all disappear. Classic FSA planning - who is going to pay for their exisitence once we are gone?
Unsuitable or offensive? Report this comment
Dazed & Confused | 19 Dec 2011 10:12 am
Oh goody! The FSA's father Christmas has opened the toy chest...anything for the brokers...errrr No! Anything for the banks...well, they have had a tough time haven't they, now its time for good old FSA Santa to have his summer break catered for while the banks drag what is left of the housing market to oblivion!
Oh Well...I guess that just means we will have to work even harder to stay in business.
Unsuitable or offensive? Report this comment
Mike | 19 Dec 2011 10:13 am
I wouldn't get to irate guys its only an FSA prediction and like everything else they do they will get it wrong. One wonders how much this review has cost. As for checking income and affordability
isn't this something we have done for years, now they make it sound as though they thought of it!!!
Unsuitable or offensive? Report this comment
Mortgageboy | 19 Dec 2011 10:18 am
Isn't it appropriate that it's Christmas, the FSA live in a fantasy world.Customers will go direct, they will wait two weeks to get an appointment with an adviser who has only been there three weeks. Unfortunately the client will not meet criteria.I really feel that some clients aren't clever enough to go direct but they need advice from someone with experience. Ask yourself how many mortgages are straightforward?
Unsuitable or offensive? Report this comment
Anonymous | 19 Dec 2011 10:25 am
So MMR will result in no more brokers and direct only deals, however, in another article the FSA are to ban no advised sales. Lenders don't have enough qualified or experienced staff to give advice so who will lenders or consumers turn to if there are no broker left, another well thought out strategy by the FSA! Another point is that this government was supposed to be taking away the power and influance banks had which lead to the credit crunch, with acts like this they are doing exactly the opposite!
Unsuitable or offensive? Report this comment
AA | 19 Dec 2011 10:31 am
Dont really agree with this article. FSA predicts more 'could' go direct. It maybe the other way round if the non advised staff needing to be fully qualified.
Unsuitable or offensive? Report this comment