Mortgages  

CML works with Money Advice Service ahead of MMR

According to Paul Smee, director general of the CML, there will be some guides issued in April to help consumers through what the rule changes will mean for them.

He said: “The introduction of MMR regulation will bring the largest change to how the mortgage market works in over a decade. The industry has shown that it is ready, and we anticipate a smooth transition into the new framework.

“We hope and expect the new rules will provide a robust and stable framework for the long term.”

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“We hope that any transition issues can be managed in a way that minimises their effect on the borrower, and the CML is ready to assist the FCA in this task.”

Mr Smee’s comments came a month ahead of the implementation of MMR, which kicks in on 26 Aprilo.

Under the new rules, there will be a clear distinction between mortgages sold on an “advised” and on an “execution-only” basis, with most future sales and variations being advised, requiring staff to be trained and qualified to the required standard to give advice.

Also according to the CML, procedures for giving advice to borrowers will be more detailed. Firms will need to ask more questions to determine what mortgage product is suitable, taking into account individual needs and circumstances, so mortgage interviews could take longer and may even be split into two separate interviews.

In a newsletter from the CML, it reminded buyers as well as remortgagors that the process has changed. It said: “People wishing to make changes to their existing mortgages will also be affected, and may be required to go through an advised process and a new affordability assessment.”

Other Changes:

The MMR regulations will strengthen measures to assess the future affordability of mortgages, as well as initial payments.

Lenders will have to apply an interest rate “stress test” - to ensure that the loan would still pass the affordability requirements even if the borrower’s payments were higher.

Lenders will also have to consider the effect of known future changes, such as retirement or redundancy, when assessing affordability.

According to the CML, lenders will have to make a more detailed assessment of the borrower’s expenditure, including normal spending as well as credit card and other loan repayments. Borrowers may need to produce more evidence of their spending habits and other commitments than before.