Deloitte: MMR will lead to fewer mortgages and higher costs
Consultancy predicts that new rules will mean fewer, higher quality mortgages and a reduction in arrears levels.
Business advisory firm Deloitte has predicted that the new rules covering the mortgage market that will come in as part of the Financial Services Authority’s Mortgage Market Review will lead to fewer products being available, tighter lending rules and higher costs.
Michael Coogan, strategic adviser at the firm’s financial services practice, said that the rules would affect different market segments in different ways, stating for example that smaller lenders that do not offer advice and that do not have access to current account data would struggle to remain competitive.
He added that “retail funded lenders and firms able to access the capital markets” will have a funding advantage over non-banks that are “unable to write new business because of funding constraints”.
The result of this, according to Mr Coogan, will be that consumers will have a more limited choice of products and will face tighter lending rules and higher costs.
However, Mr Coogan did say that the new rules will have a stabilising effect on the mortgage market as it would lead to higher quality mortgages being sold, which should in turn lead to lower house price growth and “reduce future levels of arrears and repossessions”.
He said: “The FSA’s aim is to ensure a sustainable mortgage market that works better for consumers, and is competitive and flexible without exposing lenders to unnecessary risks.
“The key question which remains to be answered is whether the MMR rules as planned may have unintended consequences which could be harmful to the market.
“The timetable for implementing these reforms will also need to be sensitive to the broader economic environment, so it is still not certain the new rules will come into effect in 2013 as planned.”