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Editor’s note: Beware of over-regulation

In last week’s issue of Mortgage Strategy our cover feature focused on the impact excessive regulation was having on the industry, particularly on small and medium-sized businesses.

The piece pointed out that there had been 30 regulatory papers to review from the Financial Conduct Authority and the Treasury, totalling more than 2,000 pages – and that was so far this year alone.

Even companies with a team specifically assigned to deal with regulation must sometimes struggle to keep up with the ever-changing expectations. So the volume of regulation pouring through is surely overwhelming for smaller firms in particular, and unmanageable without support on compliance.

As we know, the finance sector is regulated with rigour and, as soon as one complex piece of legislation or requirement has been complied with, there is a shift somewhere else in the chain, which means starting a new process to ensure compliance and sometimes undoing processes that have already been put in place.

Sure enough, even before last week’s feature could land on your desks, the Bank of England had released a statement to say that it intended to crack down on mortgage affordability, stating this time that it felt borrowers should be stress tested on how they would cope with a 3 per cent increase in lender’s SVR, rather than a 3 per cent rise in the base rate.

The Bank’s rationale now is that there is a risk of lenders loosening the standards by which they test affordability.

For all factions of the mortgage industry, regulation is essential and of course the customer must be able to afford their mortgage. However, after the MMR and the mountains of other legislation that have already been imposed, it’s becoming a matter of ‘If it’s not broken, don’t fix it.’ And there is such a thing as over-regulation, which could have a negative impact on lenders and brokers and make mortgages less accessible for the customer.

In other news last week, the Council of Mortgage Lenders officially became a thing of the past, after 28 years spent offering support to lenders and building strong relationships with intermediaries.

With many of the same familiar faces moving into UK Finance as part of the merger, it’s to be hoped that these great relationships can be retained and built on further – and that, most importantly, the individuals concerned still remember how to throw a great industry party!

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