We are now over six weeks into the new MMR environment and my first question would be: how has it been for you? A quick read of the numerous intermediary message boards and the comments that are issued beneath trade press stories will reveal it has been less than plain sailing for many although, from our experience, there have been few major issues to overcome but rather smaller annoyances that are beginning to be quelled.
As always your post-MMR experience will depend primarily on the lenders you have been recommending. Credit where it’s due a significant number did have their house in order well in advance of April 26th and we commend them for their preparation; others were not as up to speed and it will not take a genius to work out which lenders’ systems and processes have not hit the satisfactory mark. We fully understand this is a period of significant change and lenders have had a lot of developments to introduce however, in hindsight, ensuring communication avenues did not back up for hours on end should have been a priority.
That said, I get the sense that the market is slowly returning to some sense of business normality and I fully anticipate those lenders who are currently ‘gold plating’ the affordability requirements within MMR will apply some common sense in the very near future. As the FCA has repeatedly pointed out, MMR was not meant to stifle the market or make it incredibly difficult for credit-worthy borrowers to secure finance and therefore once the technology is shown to be robust, and lenders are comfortable with their interpretation of the rules, we need to see that translated to lending decisions.
While dealing with some of this short-term pain, intermediaries should not lose sight of the fact that MMR certainly puts the ball in their court and they are likely to secure significant benefits from the new regime. Prior to MMR everyone thought this might be the case and now we have the first inkling that lenders are focusing their product efforts far more on the intermediated sector.
In terms of sheer product numbers, intermediaries now have access to far more mortgages than pre-MMR. Recent research shows that while 163 new intermediary-distributed products were launched in May, 148 direct-only products were withdrawn. This means that in the last three months alone, intermediaries have welcomed 809 new products onto their sourcing systems while direct-only products have dropped by 319. Intermediaries had access to 8,105 products in May while those available through the direct channel dropped to 3,326.
This is clearly a trend that was in place pre-April 26th but I fully anticipate it will continue throughout the rest of the year – intermediaries are certainly in the box seat when it comes to lender distribution. I suspect we could see lenders place even greater focus on their intermediary lending towards the end of 2014 when they review their year-to-date lending and review whether they are going to hit targets. As we all know many lenders dropped their daily mortgage run rates in the lead up to, and beyond, MMR and therefore it seems likely that they will need to ‘go some’ in Q3 and Q4 in order to achieve their anticipated 2014 lending levels. Given the nature of offering advice to consumers through their branch networks – and the added time required for mortgage interviews, etc – my belief is that they will look instead to intermediaries to help them hit these targets. Good news all round for our sector.
However, I would say there are a number of potential flies in the ointment not least the pressure being placed on the Bank of England and the regulators to intervene more forcibly in the mortgage market. Fears of a house price bubble could mean lenders have to rein in their high LTV lending or apply further affordability constraints. I sincerely hope this isn’t the case as it’s my belief that MMR does this job anyway however one wonders if the all-encompassing focus on London and the South East might translate to universal measures for everyone. Let’s hope not but as we all know in this market, we should prepare for the unexpected.
Richard Adams is managing director of Stonebridge Group
