Mortgage lending is not rocket science and sometimes the old ways of doing things can inform modern thinking. I was reminded of this while reviewing the FSA’s latest mortgage market review paper on responsible lending which presents a more traditional approach.
Sensible lending is about knowing your customer. It is about your client under-standing the risk they are taking on, ensuring they have the ability and means to repay the loan and that they have also made a financial commitment in the form of a deposit – the so-called “canons of lending”. Information that is very capably provided by intermediaries.
The MMR proposals are going back to basics and should hold no fears for the intermediary sector. I also believe that, as intermediaries, we should put to one side the speculation and debate about what lenders might do as a result of the MMR and focus instead on the things we can control. We must not waste energy.
Sesame Bankhall Group, including PMS, has been supporting intermediaries for over 20 years and we have been through the peaks and troughs of recessions and regulatory change. This is part of normal life in the financial advice sector.
As a result of the MMR, I believe that the intermediary sector will become even more valuable to consumers and lenders.
Underwriting and affordability rules will get more complicated, it will be harder to source a mortgage, documentation requirements will increase. Intermediaries know their clients and can explain options. The service available from lenders is unlikely to improve, given the changes they are being compelled to make, and they will have to bring in significant new processes to cope with all branch advisers having to be individ-ually approved, registered with the FSA, and understand the personal liabilities that come with this.
That is why I still see a strong future for advice and, if we focus on what we are good at, which is looking after our clients’ needs, we will continue to win through. Do not waste energy on worrying about what others are doing. There are more important matters and there are things that we can control. That is certainly our approach at Sesame Bankhall Group.
John Cupis is managing director of PMS