The Mortgage Market Review (MMR) may not come into force until April 2014, but there is certainly no harm in intermediaries considering how the changes will affect their business and implementing the necessary adjustments now.
At our recent national sales conference, our appointed representatives heard a presentation from Stephen Smith, director of housing at Legal & General, on the MMR and relations with lenders in general. While a consensus seemed to exist that further regulation isn’t strictly necessary, our advisers have nevertheless taken the directives on the chin and were keen to hear what the review will mean in real terms.
Thankfully, the good news is that intermediaries shouldn’t notice a great deal of difference in their daily operations. Good advisers have long been placing the customer’s best interests at the heart of everything they do, so much of abiding by the new rules is a simple case of using common sense. Ever since compulsory mortgage regulation was introduced in 2004, the vast majority of advisers have acted ‘honestly, fairly and professionally’ as the MMR dictates and have worked diligently to ensure that the home loan eventually decided upon is suitable for the borrower and not just the ‘least worst’ or the cheapest on offer.
The new guidance contains strict stipulations around the future use of interest-only, but it is probably safe to say that the industry as a whole is already treating the products with a lot more caution than previously. Lenders that have not shied away from interest-only completely are only offering the mortgages at extremely low loan-to-value amounts anyway, so brokers will still need to exercise caution and diligence around credible repayment strategies and genuine customer need. If the rumours are to be believed and interest-only becomes the next target of ambulance-chasing organisations once the PPI well has been drained, then the products may become irrevocably tarnished anyway.
Disclosure was another buzzword to emanate from Stephen’s presentation. Even though advisers now are at pains to point out how they source their products and how they are remunerated, the MMR guidance goes even further in terms of the reporting required. Onerous though it may seem at first, advisers will soon get in the habit of documenting cases in the way the new regime requires and the future system will also better protect them from any potential complaints, should they arise. When all the minutiae of each case is recorded in black and white, there can be little room for argument once the case is settled.
One of the main points of Stephen’s presentation – and something I wholeheartedly agree on – is that mortgage brokers not only have an important role to play in the future of financial advice, but they are probably needed more than ever. If the need for every seller to have a relevant mortgage qualification reduces the number of bank branch staff advising, then mortgage brokers may become the last real place for borrowers to receive expert, first-hand advice. Brokers have jumped through a lot of hoops, regulatory or otherwise, in the past decade or so and the latest raft of legislation shouldn’t have too much of an impact on the good work they already do.
Richard Adams is managing director of Stonebridge Group