Regulation  

‘Targeted deregulation could help mortgage market’: CML

‘Targeted deregulation could help mortgage market’: CML

Regulators should go easy on any further reform to the mortgage market if competition is to be encouraged, Paul Smee has said.

The Council of Mortgage Lenders’ director general urged the Financial Conduct Authority to consider targeted deregulation as a potential driver for competition in the mortgage market.

In the CML’s response to the FCA’s Call for input on competition in the mortgage market, Mr Smee encouraged the regulator to consider whether the many recent layers of newly imposed regulation might in some ways be hindering competition, and whether some targeted de-regulatory adjustments might potentially help the competitive landscape.

Mr Smee said: “Overall, we think the UK mortgage market is actually competitive - as thousands of mortgage products from more than 100 lenders testify.

“Yet, in recent years, lenders have had to focus a lot of their resources on implementing the changes flowing from new regulation. To help the market grow in competitive terms from here, it needs a period without too much further regulatory intervention.

“That said, there are some areas where modest deregulation - or, at least, permissive clarity from regulators on areas where taking a liberal interpretation currently feels like a risk to lenders - might help.

He added that examples include the rules on assessing affordability when lending to borrowers whose loans will extend into retirement, as well as ensuring that the rules on mortgage sales and advice are fit for purpose in a digital age.

In October this year, the City watchdog published its call for input following the 2015/2016 Business Plan, in which it announced its intention to review whether there are any barriers to competition in the mortgage sector.

At the time, the FCA said it was interested in how these activities or relationships might affect competition, for instance by affecting entry, expansion, and/or the ability of consumers to make effective mortgage choices.

The FCA started this during the autumn, with a view to launching a market study in the first quarter of 2016.

The call for input will help to determine whether and how the FCA takes forward a market study on this subject next year. According to the FCA, there have been approximately 40 submissions to the call for input.

However, the CML believes there has already been “significant regulatory upheaval in the UK mortgage market over the past few years” and with the European Union’s Mortgage Credit Directive coming into force in March 2016, it is concerned that too much red tape will bind the market, instead of allowing it to create competitive products.

According to the CML’s response, one consequence has been that lenders have had to focus resources on delivering requisite regulatory changes, perhaps at the expense of innovation aimed at customers.

“The CML believes that regulators should go easy on any further reform, focusing for the time being on areas where regulation could be causing competitive distortion or suppression of legitimate business,” read its response.