Lenders traditionally look on the fourth quarter as a time to push business, offering competitive deals ahead of Christmas but this year has seen these initiatives put on hold to cope with the demands of regulation.
This means that few lenders have pipeline business to see them through to the New Year, which brokers say will see a big drive from lenders to bring in new clients in the first quarter of 2005.
Providers are planning to add products to their range in January, including Pink Home Loans. Some lenders are already offering a few pre-Christmas presents.
Cheltenham and Gloucester has launched a tracker and a two-year fixed rate at 5.09 per cent until 2006. It follows Alliance & Leicester, Skipton Building Society and Newcastle Building Society which have all launched new products since M-Day.
But brokers such as Hamptons International adviser Jonathan Cornell thinks that many clients would be best off waiting for the rush of deals in the New Year.
He says: ” If it were me, I would hang on for the New Year for these new products. Regulation has shifted the focus from competition with lenders whereas normally now they would have business to fill their pipeline through January and February.”
Research from Pink Home Loans indicates that up to 75 per cent of intermediaries say their clients are remortgaging for debt consolidation rather than raising capital.
The Miles’ report on long-term fixed-rate mortgage products was published in March and it indicated that a lender’s full product range should be made available to new and existing borrowers to curb remortgaging.
Some lenders are looking to cover all the bases and Premier Mortgage Services managing director John Malone says this is an issue that needs to be addressed quickly, with some key fact illustrations running to more than five pages.
Some brokers, such as Charcol senior technical manager Ray Boulger, think “rate tarts” will gradually disappear from the market because the KFI process will make it too arduous to chase rates.
Although KFIs, in theory, make it easier to understand the products, lenders are working hard to streamline their processes and help IFAs manage business efficiently.
There is no doubt that some KFIs will make the interview process much longer for clients. Association of Mortgage Intermediaries director Chris Cummings his concerned that lenders are trying to do too much with KFIs.
But Cornell says: ” I think there will continue to be rate tarts. If anything, the changes will prompt more people to be rate tarts because they will be more informed about the products available to them.
He says: “Regulation has been holding everything back. I do not think life will change dramatically for the consumer but there will have access to more information about products. KFIs should allow them to make a more informed choice about products.”
Ethical Mortgage Solutions director Steve Royal is confident that there will be little change to the consumer mindset although they may be initially put off my a slightly longer interview process.
He says: “Admittedly, if the process is a bit slow, it is going to make a difference but the fact is if someone wants a mortgage or is consolidating their debts they want to get on with it.”
Royal says his gut feeling is that consumers tend not to be aware of moves towards regulation and does not thinks the average consumer is going to be put off by a longer admin process.
He says: “People will always be rate-chasing and the high street will always come up with attractive products. There are always lenders who come up with the lowest possible deal and will continue to do so.”
The one-off cost of regulation, according to CP186 in May 2003, was estimated at 83m for lenders and 51m to intermediaries.
There is little doubt among industry pundits that the FSA significantly underestimated the cost of regulation, with the CML putting the figure nearer 250m. This cost will ultimately be passed on to the consumer but the effect this has on behaviour is as yet unknown.
The annual ongoing cost of regulation is forecast at 28m to lenders and 40m to intermediaries and this does not include the estimated 8m that will be spent on financial promotions.
It remains to be seen whether Treasury efforts to calculate the cost of regulation in terms of loss of business during the transitional period will be released for everyone to look at. But the Bank of England monetary policy committee is reportedly looking very closely at the impact of regulation on the sector in terms of its effect on the housing market and the likely slowdown.