MMR praised but concerns about ‘trapped’ borrowers remain
Industry figures have dubbed the mortgage market review a success one year on but have warned that problems need to be addressed.
The rules were implemented on 26 April 2014, in a year that saw mixed fortunes for the industry.
According to figures from the 23-page Intermediary Mortgage Lenders Association report, The New Normal – One Year On, total gross mortgage lending increased by more than 30 per cent in the first four months of 2014.
But in May 2014 this growth dropped to 13.1 per cent.
By November, total gross mortgage lending shrunk compared to a year before.
According to the report, these numbers supported the theory that lenders had to slow down business volumes in order to ensure systems met the new rules, but other factors such as the introduction of macro-prudential rules by the Financial Policy Committee had an effect.
It said MMR may have boosted brokers, with the number of borrowers using intermediaries rising by 20 per cent between the first and fourth quarter of 2014.
Imla executive director Peter Williams said: “MMR obviously achieved what the FCA would want in broad terms in reducing what might be seen as more risky lending – you have got fewer interest-only mortgages, less non-prime lending and less higher loan-to-value lending.”
But he warned that transitional problems remained.
Robert Thickett, policy adviser for the Building Societies Association, said the industry had adapted to the changes but he echoed Mr Williams’ concerns.
He said: “The sort of headlines we initially saw in the wake of the MMR warning that borrowers have been unable to get a mortgage as a result of their spending habits have fortunately not become a trend.
“Unfortunately, lenders are failing to employ the transitional rules to ensure existing clients are not trapped on more expensive rates has become an issue.”
In a market commentary, the Council of Mortgage Lenders said: “While the implementation of the MMR and Financial Policy Committee measures have not led to a sea change, they are likely to have heightened awareness around specific risk metrics.”
According to the CML, across the UK new loans above 4.5 times income dropped from 9.5 per cent of total new lending to 9 per cent over the past year.
Adviser view
Robert Sinclair, chief executive of Association of Mortgage Intermediaries, said it had been clear that HM Treasury was concerned to minimise the impact on firms and consumers following “the excellent work done in implementing the MMR”, and it hoped to do the same with the incoming EU Mortgage Credit Directive.
Following its consultation in September 2014, the Treasury’s MCD provisions, published in January, indicated to Mr Sinclair that its “genuine desire was to deliver as much flexibility as is possible within the framework delivered by the Brussels legislation”, he said.
