Last week the FCA published its proposals for the regulation of the second charge market.
By large, the new framework mirrors that of the first charge market, particularly in areas such as income verification, affordability checks and disclosure requirements. It even includes a new requirement for all sales to be advised.
The regulator has said the proposals, in their current form, will lead to a 20 per cent reduction in lending volumes, worth around £100m a year, and says up to 17 per cent of borrowers will no longer be able to access a second charge loan. Moreover, it predicts up to 30 per cent of consumers will be able to borrow less than they would before.
The proposals have split the industry. Many brokers have praised the regulator for the new rules, arguing the sector should have always been regulated, but specialists believe the regulator has underestimated the impact of the proposals, as our lead story shows.
But, as the MMR process proved, the regulator does listen to the industry and it will make compromises where it can. So if you believe the rules are too strict or could have a damaging effect on the sector, then you have to make your voice heard by responding to the paper. Regulation is – or should be – a two-way process.
Separately, the Government should be praised for its new scheme, Rent to Buy. The £400m scheme sees tenants rent a new-build at discounted market rates, which frees up more money to save for a deposit. After seven years they are given the option to then buy that home.
As saving for a deposit is still a major hurdle for some, the scheme could prove invaluable.