Lenders may opt for direct route

The FSA predicts lenders will be incentivised to use direct-only distribution channels following implementation of the mortgage market review.

In the final MMR consultation paper, the regulator proposes to make lenders responsible for affordability assessments and verifying income and says this could lead to the balance shifting in favour of direct deals.

The latest consultation paper says: “By giving lenders the responsibility to verify income and assess affordability, lenders might be expected to become more involved in the application process. This could lead them to prefer direct sales over introduced sales.”

Under the proposals, the FSA has agreed on “a general requirement” for intermediaries to check if a customer fits a lender’s criteria, although it will not stop them from conducting further affordability checks.

In a previous MMR paper, the regulator had proposed to prohibit intermediaries from conducting affordability checks but industry feedback suggested this would not stop intermediaries from carrying out these checks. This led the regulator to rethink the proposal.

London & Country associate director of communications David Hollingworth says: “Different lenders value different distribution models and I cannot see why this would change the use of intermediaries. Ultimately, lenders’ needs will change at different points in time, in terms of distribution, and there is only so much they can deliver through direct channels.”