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Consumer protection to the fore

Something quite extraordinary happened to the mortgage market in late

December which cast a shadow over the New Year for many mortgage


The Treasury&#39s surprise announcement that mortgage intermediaries and

advice are to be statutorily regulated under the FSA has sent many

into a spin.

I do not believe that the decision to regulate mortgage advisers is

at all a negative or unwelcome phenomenon. But I reckon that most

mortgage intermediaries would have been very grateful for a delay of

just three weeks so that the announcement hit us shortly after we had

settled into 2002.

But the unfortunate timing of the announcement is now behind us – and

we have a significant blessing in the fact that we all have plenty of

time to prepare for the new regulatory regime. At least two years in


We have a year which will see a number of mortgage industry

initiatives brought to a head – some of which had been simmering

nicely for the whole of 2001.

On the product front, competition between lenders will ensure an

active year in terms of the usual plethora of new launches. We will

also see increasing numbers of euro products.

Rates will be allied to the interest rate set by the European Central

Bank and one obvious attraction is that the ECB rate (at the time of

wri-ting) is 3.25 per cent compared with the 4 per cent Bank of

England base rate.

Barclays and Abbey National already offer euro mortgages for

properties in the UK. Despite this inevitable product innovation and

influx, most of us will continue to recommend non-sterling products

with extreme caution.

According to the European Mortgage Federation, average UK mortgage

rates in the second quarter of last year were 6.1 per cent compared

with 6.22 per cent in Germany and 7.25 per cent in Belgium.

Underwriting changes are likely as more mainstream lenders continue

the fight to get back their market share from the sub-prime

specialists. Who would have thought that the traditional banks and

building societies would readily accept applicants with serious

adverse credit or welcome self-certified borrowers, or offer a

variety of buy-tolet products?

It is not all going to be a broadening of facilities and an opening

of arms. We have recently seen lenders adopting more prudent

underwriting terms, such as restricting LTV to 90 per cent in certain


Regulation continues to sit firmly at the top of the industry&#39s

agenda. Enhancing consumer protection by increasing professionalism

of advisers remains the priority of the mortgage code. The compulsory

professional qualification deadline of Decem-ber this year stays

firmly in place, as do MCCB rules on training and competence.

The new statutory regulations under the FSA will be drafted and

widely consulted on this year, leading to full regulation by 2004. It

is widely felt that much of the usurped CP98 proposals will be

reinvented or retained.

For instance, the provisions for issuing standard PAIs to all clients

are likely to survive. While lenders feel massive relief that they

will not have to take legal responsibility for intermediaries

actions, my prediction is that lenders simply cannot afford to

continue to deal with the mortgage intermediary population as it


The lenders will exercise greater control over technology platforms

to influence significantly the provision of information to consumers.

Just look at the Halifax&#39s brilliant initiative to acquire a stake in

Mortgage Brain and secure widespread lender participation – a clear

indication of lenders&#39 priorities for 2002 and beyond.

Lenders – and even packagers – will select which intermediaries they

wish to continue trading with. It is already clear that lenders would

want to deal with bigger broker firms which control sizeable volumes

and which directly oversee the activities of their mortgage advisers.

The “aggregators”, such as franchises, networks and clubs, will

prosper. Mortgage brokers will either hang up their boots or take a

safety in numbers approach, becoming a franchisee or member of one of

the mortgage aggregators such as franchises, networks or clubs.

On to the trade bodies. Some say that the DeAnne Julius committee&#39s

recommendations are less relevant to mortgage intermediaries now that

the code has a relatively short life. However, the report accentuated

the fact that the broker sector lacked a single, representative voice

– this fact remains relevant.

Several potential trade bodies were talked about in 2001, including

Namba. We should all hope that a trade body will emerge in 2002 and

gain significant support.

2001 was the year many worried that internet mortgage businesses

would undermine traditional brokers. It followed anxiety in earlier

years that centralised call centres would also attack the viability

of personal face to face service.

This year is one in which to reflect positively on the relatively

small effect these impersonal operations have had on your business.

Despite the technological attraction of the internet, consumers will

increasingly seek good, oldfashioned mortgage advice.


Market Harborough Building Society 2 year discount

Discounted term: 2 yearsDiscount: 2.25% Payable rate: 3.49%Minimum loan: £35,000Maximum loan: £400,000 Income multiples: Over 75% if valuation three times principalincomce plus 2.5 times joint, under 75% of valuation three timesprincipal income plus 3.5 times jointArrangement fee: £295Redemption fee: 6 months penalty interest in first 5 years, onemonths notice or one months redemption interest thereafterConditions: […]

The generation game

While the FSA&#39s proposals may not seem immediately attractive toIFAs, this particular cloud may yet have a silver lining. FSAchairman Howard Davies said: “Our aim is to secure long-termimprovements for consumers through greater choice in the financialproducts available to them.”The current interpretation of “choice” is that it refers primarily tothe sales channel and through that […]

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With the publication of the FSA consultation paper 121, multi-tiesnow appear to be inevitable. Having associated themselves so publiclywith the concept, it is doubtful that the FSA will dramaticallychange its proposals now.Questions remain in many IFAs&#39 minds about what exactly is meant bythe multi-tied concept, given the noticeable lack of details in CP121.Prior to the […]

Brown announces April budget

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Rise of the machines

Head of Sustainable Investing at Royal London Asset Management, Mike Fox, looks at the case for including artificial intelligence within a sustainable investment strategy. Read the article in full here The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get […]


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