Since the regulator’s first attempt at the MMR lenders have adopted an ultra-conservative approach, particularly when it comes to product criteria.
Clearly a number of lenders chose to pre-empt the proposals before they had been set out and so we have witnessed a pull-back from areas such as interest-only and lending into retirement, based on, one can only assume, lenders’ anticipation of what the MMR would contain.
Now that we have the next document it is clear some of the stringent initial proposals have been jettisoned in favour of a more common sense approach.
There is no proposal that lenders will have to assess all interest-only loans on a repayment basis, and it is leaving it to lenders of mortgages into retirement to assess income, and therefore affordability, once the borrower goes past the state pension age.
Some lenders have already said they will wait for the final rules before changing, but this has not been their approach in the past and one wonders why they cannot change sooner. A slight loosening of interest-only and retirement loans criteria to reflect the paper would benefit brokers and clients.
I’m not advocating a move away from responsible lending but a reaction to the MMR in this way is not beyond the realms of possibility.