The FSA has raised its estimate for costs resulting from the MMR as it has previously understated the impact of removing non-advised sales.
In the previous draft of the MMR, published in December, the FSA predicted the mortgage industry could be left with an annual bill of between £47m and £170m, and between £42m and £65m in one-off costs, in order to comply with the proposals.
In the final publication, the regulator admits it has underestimated the cost to lenders resulting from its ruling on non-advised sales.
Ongoing compliance costs have now been revised up to between £49m and £172m a year and the one-off cost is expected to fall between £42m and £67m.
In the final draft, the FSA says: “On the basis of research that Oxera conducted for us and the Council of Mortgage Lenders, we expected compliance costs of this proposal to be £0.8m and ongoing compliance costs to be around £1m.”
“However, we have revised our estimate to take into account the fact that some lenders have a much larger percentage of non-advised sales at the moment and may need to recruit additional staff. We now expect one-off compliance costs to be around £2.8m and ongoing compliance costs to be around £3m.”
The cost benefit analysis outlined in the December publication otherwise remains valid, says the FSA.