It’s been just over a month since the Mortgage Market Review (MMR) conduct of business reform was launched and much has been made in both the national and trade press about the possible effects. What impact has MMR had over this period?
The impact on financial advisers
Financial advisers have had several years to familiarise themselves with the proposed reforms and as a result, the majority say they are ‘ready’ for the changes. They won’t need to do the affordability assessing as this responsibility falls exclusively to the lender, but they do all need to hold a mortgage qualification.
Finding ways around it
The reform applies only to residential mortgages, not those for a buy-to-let property. As such, there has been talk that some mortgage advisers have found ways to break the rules. By fraudulently submitting buy-to-let mortgage applications, they can get round the robust financial assessment. This fear has been expressed by many mortgage advisers and FT Adviser claims the practice is on the rise. Lloyds Banking Group has already removed some of its intermediaries after irregularities were spotted. The worry is that some prospective borrowers might come to a financial adviser expecting advice based on this practice.
Effects on house prices
Economists expect that the reform will have an impact on activity levels. Naturally, it’s too early to tell whether this has been the case thus far but the prediction made in IFA Magazine is that demand will remain robust as mortgage rates stay low.
While the idea behind the reform is to ‘make it work better for consumers’ and stop irresponsible lending, according to the FCA, the media has been full of scaremongering stories, alleging that the public will need to all but reveal their inside leg measurement when applying for a mortgage. The new, tough affordability assessments require a lot more financial information regarding future expenditure and could see some individuals turned down under the new scheme that might not have been under the old. Approvals may also take longer, so says FT Adviser.
Highlights the importance of independent financial advice
All of the above compounds the importance of reliable and accurate financial advice – be it to help people reassess their finances to increase their future mortgage approval chances or by helping them get through periods of debt. Mortgage lending is an area that is fraught with confusion for most consumers and though the reform has been designed to help, it could leave many people with yet more questions. Step forward, reputable advisers!