Mortgage market experts have called on the regulator to focus attention on failings in transitional arrangements which have left a number of legacy and interest-only borrowers ‘trapped’ in existing mortgages, in response to its business plan revealing new reviews into the sector.
Earlier today (24 March), the Financial Conduct Authority stated that as part of its plan for 2015/16, the assessment of how firms are implementing post-Mortgage Market Review rules would continue.
As part of this, the advice and distribution review would conclude in the summer, while a review into responsible lending would commence in April.
In the autumn the regulator will begin a wider assessment of barriers to competition - such as factors affecting consumers’ ability to access credit and ability to switch providers and barriers to entry or expansion - with a view to launching a market study in early 2016.
Andrew Montlake, Coreco’s director for marketing and communications, said he would like to see more work on why lenders seem to be ignoring transitional arrangements, causing a growing number of potential remortgage customers to be left out in the cold.
“Questions around affordability, age and the decline of a sensible interest only market have caused issues for many and a remedy now, before rates finally start to increase again, could head off problems in the future,” he added.
David Hollingworth, associate director for communications at London and Country Mortgages, said it was right for the FCA to consider how the MMR rules have worked and examine how firms have interpreted them, particularly where that may have been to the detriment of consumers.
“Changes to affordability, maximum age and interest only can really limit the options for borrowers so it’s important to assess whether that is because some of the practical implementation has gone too far.”
He added that it was understandable why lenders would not want to appear to have applied too light a touch, so a review is a good opportunity for the regulator to consider theory and practice and hopefully give a valuable steer to providers where appropriate.
Mark Harris, chief executive of SPF Private Clients, told FTAdviser that while there is nothing wrong with much of the MMR, the execution of the rules by some lenders has left a lot to be desired.
“Undeniably, there were unintended consequences following MMR but it seems that these will not be reviewed for another 12 months. Even then, it’s likely that the FCA’s findings will be at loggerheads with the PRA’s requirements; one wonders how this will be resolved.”
The FCA has previously told FTAdviser readers that it has been ‘disappointed’ in the way lenders have interpreted rules and hinted it could seek to take action under Treating Customers Fairly provisions.