Two years, ago I wrote an article, “Have you had your MMR jab?” and although we are still 18 months away from implementation, some of the main themes still resonate. As intermediaries, we have worked with the proposed change, as consumer behaviour will continue to drive changes to mortgage requirements.
For example, if we compare the UK with the rest of the world, a much higher percentage of consumers have a mortgage – 36 per cent in the UK compared with 24 per cent globally – but just 7 per cent of over-65s in the UK have a mortgage compared with 20 per cent worldwide.
The key themes in the latest MMR consultation paper remain
Responsible lending is vital. Ultimate responsibility lies with lenders but advisers must remember they are still responsible for the advice given to the consumer. This measure means an end to self-certification and a tightening of fast track. It also tightens the circumstances in which interest-only mortgages are appropriate as repayment capacity is assessed and requires a suitable repayment vehicle.
Distribution means non-advised sales will be banned unless covered under guidelines for certain high-net worth individuals and vulnerable customers. Advice becomes the cornerstone of any mortgage proposal. This will help advisers to look at the holistic needs of the client using a whole of market offering.
It has differentiated intermediaries from the banks and will continue to do so. A ban on non-advised will put significant pressure on banks as they look to upskill their advisers to meet MMR requirements, not least having to ensure the right level of qualifications.
Disclosure is replacing the IDD with key messages and removing the requirement for intermediaries to offer a fee-only option.
I firmly believe that intermediaries will be the winners as much of what the MMR proposes is about how responsible intermediaries operate today. Significant change will hit the banks and, in particular, those that supply mortgages to consumers without giving advice.
We are all concerned about additional regulation and extra cost at a time when the mortgage market is weak but we must support moves that put customer interests first. Product-push sales strategies are a thing of the past and we all need to focus on customer needs.
Most customers will respond well to being asked open questions and being listened to and often you find out more and can make a better recommendation as a result. Then you need to store all that data securely for ongoing reviews and holistic protection.
However, despite my positive review of the MMR paper, I do urge both the regulator and industry colleagues to continue to push for individual registration. The FSA has divorced this from the MMR but has said it remains on the agenda. I have already said the proposed regulation will protect consumers and I also believe it will help us to promote professional advisers. However, the vital missing piece of the jigsaw is individual registration, which must be addressed to give the ultimate comfort to the mortgage market.
Dev Malle is sales and marketing director at Personal Touch Financial Services