Burying your head in the sand and hoping the Mortgage Credit Directive will go away is not the answer
Unless you have been living under a rock for the past couple of years you will no doubt know the industry will adopt the Mortgage Credit Directive on 21 March.
With it will come a number of changes, such as various areas that have thus far fallen outside the regulator’s remit being brought into the fold. So how prepared are you? The trade press has been full of warnings and speculation over the MCD for some time now, yet I fear many brokers have still not given it the attention it deserves. As a result, they will find themselves ill- prepared come deadline day.
Perhaps the most notable change will be the full regulation of second charge loans. Advisers will need to treat secured loans in exactly the same way as first charge mortgages. If they choose not to offer them they can no longer call themselves independent brokers. As this is a title most take great pride in one would expect few will be willing to give it up.
Given the specialist nature of second charge loans I have no doubt brokers are nervous about the regulatory changes. Second charges have long been somewhat neglected by mortgage brokers so to suddenly have to make these products part of your offering must seem daunting.
What is more, the wider market has had its fair share of regulatory intervention of late. Indeed, it seems like no time at all since brokers were having to get to grips with the MMR and the upheaval that brought, so I fully understand why intermediaries may be reluctant to embrace yet more disruption. However, the MCD is happening – and it is happening imminently.
Burying your head in the sand is not the way forward.
For the last year at least lenders have been taking to the road to educate brokers on the impact the MCD will have on their business. Secured loan providers have been active in promoting the benefits of second charges and offering guidance to advisers that have perhaps avoided the specialist area so far. Meanwhile, trade bodies have provided plenty of support to members, and trade publications have reported on every aspect, ensuring readers are clued up on how it will impact them.
As such, there really is no excuse for not being up to date with what has to be done. So why the apathy I have witnessed in some pockets of the broker community? If advisers are not prepared to offer secured loans by the time the directive comes into play they risk providing clients with a disjointed sales process. If they can only offer some options but not others they immediately put themselves at a disadvantage compared with those that can.
The need for sound advice is likely to increase this year as the changes taking place in the buy-to-let arena combined with continued uncertainty in the economy lead more consumers to recognise the need for expert guidance when seeking financial products. Brokers will miss out on this opportunity if they are not able to offer a comprehensive service.
So action must be taken now before it is too late. Take the first steps today. Even if those steps have to be retraced in the future, at least you have made a start. Take advantage of the support on offer from providers and lenders, utilise all the information available from trade bodies and the regulator and, where possible, attend roadshows and events. This will give you the best chance of being MCD-ready.
Phil Whitehouse is managing director of MCI Mortgage Club