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TSC committee member calls for MMR impact review

Garnier Mark 250

Treasury select committee member and Conservative MP Mark Garnier will push for a parliamentary review of the MMR and its impact.

Brokers have complained lenders are not using the transitional arrangements written into the MMR properly as they fear retrospective action  from the regulator.

The transitional rules allow lenders to waive affordability checks for borrowers who may be trapped under the new rules as long as the customer does not wish to borrow more money, there is no “material impact” on affordability, and they have a good payment history.

The rules apply to borrowers staying with their current lender and those who want to switch to a new lender.

But brokers say most lenders are applying full affordability checks on borrowers and subsequently rejecting the application to switch to a cheaper product, even though the transitional arrangements mean they do not have to.

Garnier says he has sympathy with lenders, adding they have “zero leeway”.

He says: “I have some sympathy with the regulated. We have an extraordinary period where just about everything has been missold: endowments, PPI, interest rate hedging. Whatever you can think of there is a misselling scandal.

“The narrative from the regulator is there will be very, very heavy comeback. If you are the regulated and the narrative from the regulator is zero tolerance then you have zero leeway. If you think there is a risk – whether genuine or not – then you will air on the side of caution.”

But he added that he would push TSC chair Andrew Tyrie to consider an investigation into the MMR and its impact.

He said: “We need to look into the mortgage market review at the Treasury select committee. I don’t think it has been raised properly. We have done the Retail Distribution Review but not the MMR.”

Association of Mortgage Intermediaries chief executive Robert Sinclair says the TSC should ask lenders if they are applying the arrangements to all consumers “fairly and equally” and insist on data as proof.

He adds: “The industry was successful through the MMR process in moving away from prescriptive rules and asked for greater flexibility in order to aid consumers. It is therefore disappointing that having got the correct policy outcome, lenders still appear to be concerned about the risk of retrospective action by the FCA.

“We believe the rules are there to help consumers and too many lenders are hiding behind them in order to either protect their risk position or their financial position by keeping customers on rates higher than they could obtain if they were allowed to use the transitional provisions.”

Adviser view

Daniel Bailey, managing director, Middleton Finance

We’ve seen different interpretations of the rules from lenders, with some far more extreme than others. A lot of brokers have had a frustrating time with this and while some lenders were certainly better prepared for the new rules, a review strikes you as a good move.


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