Gerry O’Brien Viewpoint
Five years after the biggest shake-up that the mortgage market has ever seen, we have the first aftershock which says farewell to light-touch regulation and heralds a new era of high-intensity regulation.
Considerable strides have been made since self-regulation was replaced after M-Day. We have moved from an era of rampant excess – the first Mortgage Expo I attended featured bars and pole dancers – and caveat emptor, a time in which not one individual nor a single firm were ever deregulated for misselling.
Just as the mortgage market review is triggering signs of panic among brokers, so M-Day was expected to provide a catalyst for a major industry implosion. The difference is that five years ago, it was worthwhile for even bad mortgage advisers to stay in the industry. At the peak of the housing market, there was too much money to be made to let a little inconvenience such as regulation force your hand.
Today, with a much reduced mortgage market, plus the regulator seeking individual registration to keep abreast of who is doing what and where, now we will see the real exodus from the market and that is no bad thing.
Five years ago, the regulator was quick to show its teeth with a review of higher-risk small mortgage firms. Fifty-one firms were visited and three firms put into enforcement for breaking the rules. To date, the regulator has imposed fines totalling more than £3.5m.
In its favour, costs became more transparent, the complaint process was structured and it was easier to shop around – but now that the credit crunch has curbed lending activities, for many, shopping around is no longer an option. We can see with the benefit of hindsight that regulation did not go nearly far enough.
Regulating the capital and cash of mortgage banks might have been preferable to a box- ticking procedure. No one can be proud of the customer outcomes when we have repossession at high levels, a lack of credit and lending running at almost a third of where it was two years ago. M-Day’s failure almost certainly contributed to the most horrific economic conditions that most people will see in their lifetime.
It was perfectly clear to us at Home of Choice that a regulated market could not maintain the same number of networks and advisers and that consolidation would be an inevitable consequence. The market may be shrinking but M-Day has created an exciting template for intermediaries who pride themselves on the quality of advice and professionalism and a quick assessment of the MMR proposals indicate that the regulator will continue to do the same.
Gerry O’Brien is chief executive officer of Home of Choice