Bob Hunt is Chief Executive of Paradigm Mortgage Services
The Mortgage Market Review – remember that? – came bounding back into broker and lender consciousness last month when the FSA announced it was putting back the publication of its MMR proposals until the Autumn.
The initial plan had been for a summer publication date, however, it appears that the project is so sizeable and, quite frankly, so damn important that the FSA needs further time to get it right.
Consultation and discussion periods are all the rage at present and perhaps the FSA is taking its lead from the Coalition Government who, like others before them, appear quick to follow certain policy proposals with a subsequent further discussion stage, followed by either a complete disowning of the original proposals via a u-turn, a suggestion that the proposals were only really for discussion anyway or some rather significant changes, followed by a further consultation period.
If this pattern is to be followed by the FSA then one suspects we will see some rather large changes to the original MMR proposals, many of which at the time caused major consternation amongst both lenders and brokers - certainly so given how far-reaching many of the proposals were and the fact they were being dropped onto a mortgage market which was muted to say the least.
Since the Coalition Government came to power there does appear to have been a rather large step back from attempts to railroad the MMR proposals through, and we can only rejoice that this has been the case.
It would not be surprising to find that political pressure is being placed on the regulator because of the vast importance the housing and mortgage market has for the overall well-being of UK plc. The last thing any Government would want to do is dampen housing demand even further, whilst at the same time take away many of the potential products and means by which its citizens can gain mortgage finance.
As they originally stood, the MMR proposals would potentially have seen many mortgage product types regulated out of existence; it will therefore be interesting to see how far the FSA have moved away from its original thinking, in particular on issues such as self-certification and interest-only mortgages.
If we thought however that the regulator was planning for a much less interventionist strategy when it comes to mortgage products, then we may well need to think again.
Suggestions that the FSA may intervene in product innovation far earlier in the process than at point-of sale could have a disturbing effect on product innovation.
Indeed, if the intervention comes early, and is particularly stringent, the market may never get to see large swathes of product innovation because the FSA may determine them inappropriate and at risk of causing far too much consumer detriment to be allowed to be sold.
Such a step would be new, and quite frankly, dangerous territory as product innovation (particularly in the current mortgage market) is absolutely vital if we are to provide finance to borrowers whose work/life circumstances are changing constantly.
All in all I believe the FSA is right to hold back on any MMR proposals; I might even suggest that the Autumn is still too early given the slack market we are all currently dealing with.
Far better perhaps to give the market further time to recover and to have a period of relative stability, before introducing a range of measures which could have a seismic effect.
Plus, of course we have the European dimension to think about and it seems entirely sensible not to have to regulate twice given what might be coming through from the European Parliament.
There’s a saying I recall: patience is the companion of wisdom.
These are issues which are far too important to get wrong and therefore let’s take all the time we need to get them right.
