It seems not a week goes by without another example of lenders’ overzealous attitudes to regulatory reform. We have already seen the bizarre lines of questioning by some as part of their MMR affordability checks, and the failure to follow transitional rules to help borrowers trapped on high SVRs.
Now the next stormclouds are gathering: LTI cap rules from the Bank of England. Despite the rules not applying until October, lenders including Lloyds Banking Group, Royal Bank of Scotland and Nationwide have introduced LTI caps.
The moves have left brokers questioning whether the FCA and the Bank are pulling in different directions – the former putting the spotlight on affordability as a whole while the latter adopts a narrower focus by restricting high-LTI lending.
So it rankles somewhat to hear Imla chairman Charles Haresnape say brokers are overreacting by suggesting there is a conflict between the MMR and the Bank-imposed LTI cap.
As we report this week, the feeling among brokers is if anyone is overreacting it is lenders themselves, as evidenced by the number of them jumping the gun on the cap. Haresnape argues the latest regulatory changes will not see a significant reduction in lending, but brokers are not so sure.
Clearly, lenders want to stay on the right side of the law, whichever regulatory body happens to be laying it down. But the ever-tightening criteria across all fronts just results in brokers, and borrowers, being caught in the crossfire.
Brokers need to know where they stand when it comes to submitting applications. Lenders, the FCA and the Bank must work together to ensure good applicants are not losing out due to an overly cautious approach to compliance.