The Financial Conduct Authority has announced it will allow pipeline applications to continue on a non-advised basis for three months after the introduction of the Mortgage Market Review, even if a change is made, as long as they are received before 26 April 2014.
This transitional provision for non-advised sales applies to both direct and intermediary business, but all other elements of the MMR, including its responsible lending requirements, will apply.
The FCA’s latest quarterly consultation paper says firms have raised concerns that if a change is made to an application, they would have to apply the MMR rules, which could mean a non-advised application would need to become advised. They argued it may not be in the best interests of the customer as it could cause delays and increase costs.
The FCA paper says: “We have concerns about allowing a further three-month transitional period as it could enable applications prevented under the new rules to proceed, which would undermine the protections the MMR provides to consumers. However, we also see the case for allowing a transitional provision to ensure the consumer does not suffer from unnecessary delays or costs.”
However, the regulator adds that firms could avoid the issue by getting rid of the non-advised sales process ahead of MMR implementation on 26 April.
In October, the then Financial Services Authority published the MMR final rules, which will ban non-advised mortgage sales where there is any form of “interactive dialogue” with a customer. However, consumers can change things like their repayment method, switch rates or take out retention deals without advice as long as they do not wish to borrow more.
Building Societies Association head of mortgage policy Paul Broadhead says: “This is absolutely the right approach, although we would have liked a little longer.”