Responses to the Finacial Conduct Authority’s mortgage rule review close today, which promise to bring sweeping changes to the home loans market and the role of brokers.
The City regulator’s review is set against Labour plan to build 1.5 million houses by the next election. It wants people to be able to buy these homes.
When regulators relaxed a decade-long lending rule in July to allow large lenders to lend over 15% of their overall new home loans at over 4.5 times a buyer’s income, the Chancellor made her views clear on what she hoped the move would bring.
Rachel Reeves said the move would lead to 36,000 extra first-time buyers entering the market in the first full year of the relaxations.
The FCA said, when it published the consultation in June, that its intension was to “rebalance the collective risk appetite in mortgage lending, including trade-offs and risk that this could lead to”.
Property professionals submitting applications to the review say the regulator’s scope it wide-ranging.
It includes encouraging more first-time buyers, the self-employed and those on variable income into to market.
The regulator will also look at barriers to shared ownership and later life lending.
It will also the wider use of rent-based affordability tests and ways to boost digital house buying.
But the role of the broker is also under the spotlight.
In an earlier May consultation paper, the FCA said it wanted to increase the use of execution-only sales in this area to lower borrowing costs.
The watchdog laid out three scenarios that its proposed broker fee changes could lead to.
Its highest case was a 7.5% fall in home loans sold by intermediaries — around 97,000 mortgages — leading to a £95.1m fall in procuration fees and a £21.4m drop in consumer charges, adding up to £116.5m in lost fees.
Brokers are concerned that this more sweeping review will lead to further changes.
Broker bodies say that as around nine in 10 mortgages arranged through intermediaries, any regulatory simplification must not dilute access to impartial, professional guidance.
They add that the FCA should continue to encourage advice-led mortgages so customers can compare options and avoid foreseeable harm.
Coventry for Intermediaries head of intermediary relationships Jonathan Stinton lends support.
He says: “Whatever changes come, brokers will remain central to helping clients make sense of their options. Their role in guiding people through product transfers, remortgages and all the complexity in between is essential.”
More to follow . . .
