The Financial Conduct Authority has warned both lenders and brokers active in the second charge market they must get their heads round various new challenges inherent in the implementation of the EU-wide Mortgage Credit Directive by next Spring.
Speaking this morning at a Westminster Business Forum conference, the FCA’s technical mortgage specialist Keith Hale said the new regulatory regime - set for 21 March next year - will impact the UK’s mortgage market less than other EU member states, describing the changes as “incremental”.
However, the MCD does not make any distinction between first and second charge mortgages, so this is one area where there will be “significant change” which firms “must get their head around”.
“For those in the first charge market, firms must do a proper walk through of their systems and processes, brokers need to look at their service and product disclosure, as well as renumeration - no sales targets - and also ask whether they will restrict their ranges to first or second charge?” he stated, adding that communication across the market is also really important, as there will be changed expectations between lenders and intermediaries.
This will be incremental compared to the change hitting the second charge side though, which Mr Hale said would start with the “significant distraction” of actually getting authorised.
“For lenders they must look at responsible lending, arrears handling - fair treatment - and systems.
“Brokers must tackle a whole new conduct regime, so they really need to get their heads around it now, as it is very different from existing expectations. Compliant advice means having regard to appropriate individual outcomes, not simply finding customer the cheapest deal.”
He urged those existing players to think about their business models, asking whether they want to be restricted to just being second charge, or whether this regulatory change would be the time to go whole of market.
“Firms must think about the opportunities which a new regulatory regime provides, implement systems and then think about where to innovate - much like post MMR.”
Elsewhere, Mr Hale also mentioned that a final consultation is underway on passporting across the EU - bring single market opportunity for those looking to expand - although he admitted to having no idea how many will take it up. Consumer buy-to-let also requires a separate legal regime which means firms must be registered by the FCA, with a portal already open.