Nigel Glossop from Alexander James Mortgage Services comments on how the implementation of the Mortgage Market Review will affect the housing industry.
A very important date is fast approaching for the UK mortgage industry and that is the introduction of the Mortgage Market Review (MMR). This is scheduled to come into operation at the end of April and will require almost every mortgage transaction to be conducted on the basis of providing the borrower with ‘advice and a recommendation’ – something that not all lenders currently undertake, but is the basis on which almost all mortgage brokers already conduct their business.
Until now, those offering mortgages to the public could elect to provide what has been termed ‘information only’ or ‘advice and recommendation’.
Many high street mortgage lenders currently elect to offer mortgages to customers using ‘information only’, which means that they ask questions of a customer’s perceived needs and then offer them the product that is closest matched to their requirements – however, no advice in terms of suitability is provided by the lender.
The Financial Conduct Authority (FCA) has been unhappy with the fact that the single biggest transaction that most people are likely to undertake, the purchase of their home, can be conducted without receiving formal advice.
As a consequence the FCA is introducing the MMR, and a key plank in this new regulatory regime is that it is no longer deemed acceptable to provide the customer with ‘information only’.
The new rules in almost every case require the mortgage adviser to provide written ‘advice and a recommendation’ as to the suitability of a particular mortgage product and how that matches a customer’s individual needs.
The other key facet that the MMR is introducing is that responsibility will be placed on the mortgage lenders, who will have to be able to demonstrate to the regulator that they have thoroughly assessed the client’s ability to afford the mortgage, both now and in the future.
This significant change may reduce activity in the housing and mortgage markets at around the time of its implementation and for a period afterwards while lenders adjust to a slightly different basis of working.
Nigel Glossop is from Alexander James Mortgage Services – for further information call 0845 437 9602 or email: nigel.glossop@ajms.org.uk or visit: www.ajms.org.uk.
