I used to love the programme Catchphrase, simple idea, the pictures were the clue to a well known phrase and you literally had to “say what you see”.
There is an argument that in coming out with the new Mortgage Market Review today, the FSA have actually just put into words what they have seen lenders across the UK already doing.
In actual fact, however, that would be a great disservice to them as there is far more to it than that.
First off, in managing to resist the hysteria generated by those who say these rules do not go far enough and those who say they go too far, the FSA has tried to produce a balanced, sensible blueprint for future mortgage transactions.
In the main they have managed to achieve this and whilst you could say that actually for most borrowers there will not really be much of a change from where the market is now, as it could be argued that lenders have corrected themselves post-crunch and put some of these rules in place already, (remember we have seen the draft plans some weeks back); some rules were undoubtedly needed to be set in stone to prevent a recurrence of past issues in the future.
Whilst decent independent brokers have been following this approach for many years; advising carefully, assessing needs and circumstances whilst acting in the best interests of the customer, the whole question of advice needed to be addressed across the board.
It was always crazy that a First Time Buyer could walk into a branch and come out with the biggest loan they are ever going to take out without getting any advice.
Although the MMR has at least rectified many issues, the FSA have still caved in to lenders demands that some product changes, especially where fees are added to the loan, can still be done on an execution only basis which could lead to some customer discontent.
It is sensible however, that the FSA have stopped short of bans on interest only, age caps and the like, leaving it open to a certain degree to lenders to manage their own affairs, but the challenge will be in how lenders choose to interpret these guidelines. This in itself will give us all a clue as to whether lenders actually want to lend or not.
The very act of publishing the final rules should remove much of the uncertainty that some lenders used as an excuse for over-tightening lending criteria and I hope to even see a sensible relaxation which will allow more borrowers into the market.
An instant relaxation of these rules for so called “Mortgage Prisoners” is also welcome, which should help to protect some of these borrowers at least from being used as a profit making tool on rising variable rates as they are unable to move elsewhere.
It is however disappointing that individual authorisation of advisers has still been deferred as this one simple item would do much to send the last of the cowboys running to the hills.
The good news is that it will help to standardise mortgages going forward and ensure that the customers best interests are being served. In other words making sure that loans are affordable, there is a plan for paying it back and sensible advice is given. This in itself will reduce issues in the future.
In short, to coin another famous catchphrase, “It’s good, but it’s not quite right”. Although, to be perfectly fair, it is pretty close and overall should be welcomed with open arms.