Brokers are more advanced in their preparations for the Mortgage Market Review than lenders, according to the Financial Conduct Authority.
However, the regulator says a third of the industry are either behind in their plans or have not adequately planned for the MMR.
The regulator sent out a survey to 5,600 firms – a mixture of lender and broker firms – in May to gauge their readiness for 26 April next year, when the MMR comes into force. Around 68 per cent of firms responded to the survey.
The three things the FCA was looking to find out were: how ready firms were, in terms of implementing their plan to comply with the new rules, whether they needed any help from the regulator and what were the biggest and concerns and risks firms were facing.
Roughly two-thirds of firms are on track to meet the MMR requirements. The FCA says this means they have a plan in place, they are making their way through the plan and will deliver what they have yet to put in place by the time the MMR is implemented.
The third of respondents – roughly 1,250 firms – which are not on track either have plans which are either not good enough or, if the plan is adequate, they are behind implementing it.
Out of the 248 lenders in the market, 71 per cent – or 177 – responded to the survey, while 67 per cent of intermediary firms – or 3,486 of 5,176 – responded.
Of the firms which responded, 48 per cent of lenders and 25 per cent of intermediary firms were behind in their planning with one or more elements of the MMR. However, all firms said they would formulate and implement their plan on time.
FCA director of mortgages and consumer lending Linda Woodall says: “Overall, you would say that lenders are less prepared than intermediaries. To some extent that is understandable because the MMR rules bite more significantly on them and they have got bigger, more complex range of tasks to undertake with the changes in their systems, training of their staff and the like.
“Nevertheless, they tell us they will still be ready on time, so even if they are behind the curve they can still make it up. The good news for lenders is that they are very well advanced for their plans to implement affordability assessments – that is something they have really motored on, which is really good.”
The main concerns brokers have centre around disclosure, execution-only sales and evidencing suitability.
The MMR removes the need for firms to supply an initial disclosure document, which provides key information about commission and the services brokers offer, but ask that firms provide the “key messages” about product ranges and remuneration “clearly and prominently”.
However, firms can still provide written communication to customers, using the IDD if they choose.
The rules also ban non-advised sales for all but minor contract variations. However, once a borrower has received advice they can reject it and proceed on an execution-only basis, except in the case of sale and rent back.
Woodall says some brokers were concerned that they would have to develop an execution-only offering but she stressed this was not the case and brokers can reject the business if they feel uncomfortable proceeding on an execution-only business.
She says: “Particularly, the execution-only point, a number of firms were expressing concerns that they were mandated to provide such a service if any of their customers didn’t want an advice offering.
“We have conveyed this, but we will do it again: They are not mandated to provide such a service. If the offering they want to make is an advised proposition, then that is fine.”
Have you started in your preparations for MMR? Or is it too far off to start thinking about it? Let us know in the comment section below.