The recent FCA Consultation Paper CP19/17, ‘Consultation on mortgage advice and selling standards’ has been described as “one of the most deceitful documents I’ve seen from the regulator in some time” by AMI’s Chief Executive, Robert Sinclair.
Speaking at FSE Manchester, Sinclair (pictured) suggested that the FCA’s apparent u-turn to make “execution-only business easier” was “dangerous”.
He argued the FCA was now trying to row back on the rules introduced as part of the MMR which were designed to “make execution-only difficult…and that lenders had to sign all this off by Board committee”.
“To say now, because they have an unfortunate lapse of corporate memory, that this is not what they meant is untrue,” he said. “They meant it and there was a good reason for doing it.”
Sinclair suggested that part of the reason for the attempt to make execution-only business easier to write is because it accounts for in excess of 30% of all mortgage business. He argued that because the market is in a different place to what has been intended post-MMR, the FCA’s Consultation Paper is “an attempt to legitimise what has been done as opposed to actually going back and sorting the problem”.
“This advice change is going to be difficult because they want to change affordability as part of this process,” said Sinclair. ”They want to make it easier to do execution-only and they want to legitimise it so that lenders can offer a product on execution-only which is cheaper than on an advised rate. I think that is dangerous.”
Sinclair also argued that a focus on price would not help mortgage customers who have more complex needs and where product criteria such as ERCs was not widely understood.
He also said that the Consultation Paper could deliver some fundamental market changes. “The view is that purchase, in its various guises, and additional borrowing will stay advised but there are definite moves to take remortgage borrowing into a different space and make it a low-cost utility.”
Sinclair went on to say that part of the problem was that the architects of the Mortgages Market Study and the Consultation Paper were approaching the issues having dealt with “a benign market for the last 10 years where nothing has gone wrong”.
He said: “When we hit the next crash, as there has to be, all of this will go to hell in a handcart… if this happens. So I will be fighting quite hard to make sure that none of this happens. However, unless the other lender trade bodies fall behind us on this I think it will be hard to push back against all of it.”