More stringent affordability checks, tighter income verification and a clampdown on interest-only lending have all now been broadly accepted and lenders have adapted.
But in the Financial Services Authority’s final MMR consultation paper, published just before Christmas, there was a bombshell. It has proposed a ban on all non-advised mortgage sales where there is interaction with clients. It would include everything from face-to-face branch sales to online and phone sales.
The changes could be costly for lenders, so the Council of Mortgage Lenders is fighting hard against them.
In the Lending Zone cover feature this week, we examine the implications for lenders and how it may affect their distribution strategy. The regulator reasons that consumers are currently unsure about whether they have received advice or purely information when they buy a mortgage.
By banning non-advised sales, it says consumers will be clear that they have spoken to a trained adviser who has recommended the best deal for them.
“The changes could be costly for lenders, so the CML is fighting hard against them”
The CML claims an advised process is more cumbersome and takes 1.7 hours longer than a non-advised sale. It also believes certain features of interaction, such as telephone updates, should not require compulsory advice.
It is unclear where the chips will fall when the FSA presents its final rules later this year but the proposed changes to advice are right at the top of lenders’ agenda.
Elsewhere, on page 31 John Murray reflects on the mortgage market over the past 30 years and the dramatic changes it has undergone. Murray started writing about the market in 1982, when 57.2% of the population owned their own home and only 10.7% relied on the private rental sector.
And on page 30, Eric Stoclet, chief executive of Crown Mortgage Management, takes a look at the effects of high inflation on the economy.”The changes could be costly for lenders, so the CML is fighting hard against them”