MortgagesSep 22 2016

FCA mortgage manager raises concern about market

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FCA mortgage manager raises concern about market

The Financial Conduct Authority’s mortgage sector manager has expressed concern about where growth will come from in the mortgage market.

Speaking at the Association of Short Term Lenders conference in London, Lynda Blackwell said smaller lenders could find themselves lowering their standards to look for business.

She said: “Where is growth going to come in future in this market, where you have got a saturated prime market which is highly competitive?

“Overall mortgage activity is below trend and remortgaging levels remain subdued.

“The number of active lenders in the market has increased by 10 per cent and the top six firms take 75 per cent of the lending which means all the smaller firms really need to diversify.”

One of the ways smaller lenders could be diversifying is by targeting underserved consumers, Ms Blackwell said, particularly given the changes to taxation around buy-to-let.

But she sounded a note of caution: “We are starting to see LTVs on interest-only mortgage start to creep up. We are starting to see sub-prime and a tolerance of poor payment histories.

“We don’t want to see a race to the bottom and it is something we are monitoring closely.”

We don't want to see a race to the bottom and it is something we are monitoring closelyLynda Blackwell

Ms Blackwell also addressing bridging loans, where she said medium fees could be more than five times higher on average.

She said: “This is a really expensive form of finance and that’s why it is important that intermediaries and lenders take care that a mainstream mortgage doesn’t meet the consumer’s needs better.

“But from what’s being reported to us the quality looks really good and that’s not what we had expected.”

But she also said that as much as 84 per cent of the sector could be providing unregulated loans.

She said: “That goes largely under our radar. Concerns continue to be raised with us about the quality of business processes on that side.

“Unfortunately the reputation of the good bridging firms in this sector is easily pulled down by the less scrupulous firms.”