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Editor’s note: Regulatory clarity needed

At the start of October the FCA launched a call for inputs on competition in the mortgage sector. A feedback statement will be published in the first quarter of this year and the regulator will decide whether to proceed with a market study.

It is keen to explore whether all parts of the market are competitive and if they provide good outcomes for consumers. Additionally, the FCA wants to determine how competition may be affected by changes in the economy and whether regulation, including the Mortgage Market Review, has had an impact.

The Council of Mortgage Lenders believes there is ample competition in the market but it has recommended that the regulator refrain from adding more rules, even going as far as to suggest “modest de-regulation” in some areas.

To an extent this is a sensible request, but what the FCA should clearly do – and the CML is also calling for – is provide more clarity around existing rules.

Two examples of where a lack of clarity has had a negative impact on borrowers are lending into retirement and mortgage prisoners. Many lenders have excessively tight criteria for older borrowers as they fear a retrospective backlash from the regulator. The same applies to mortgage prisoners, with many lenders still failing to use the transitional arrangements – which allow them to waive parts of the MMR to avoid borrowers being trapped in their existing deals – in the manner intended. Clear guidance from the FCA would potentially put lenders at ease and result in positive outcomes for borrowers.

As the CML puts it: “We believe that the regulator could provide greater clarity where firms may feel that they are taking a risk if they opt for a liberal interpretation of the rules.”

The FCA’s decision to review competition in the market is welcome but it is totally at odds with the Government, which wants to significantly reduce competition in the buy-to-let sector. One hopes that any market study references the effect this unparalleled intervention in the market will have and that the Government takes this on board. The last thing buy-to-let needs is even further intervention.

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