FCA defends MMR

Robyn Hall

April 23, 2015

She said both the self-employed and older borrowers are still effectively catered for, while she attributed the epidemic of mortgage prisoners to irresponsible lending rather than MMR, which came into force in April 2014.

Tighter lending to the credit-impaired also happened before MMR, she added, as lenders “took the ball away and didn’t want to play anymore”.

On self-employed borrowers Blackwell said lending has remained consistent and plenty of lenders of all types remain active in the market.

She said: “There are lots of products available to the self-employed, and in fact lots of lenders don’t distinguish between whether you are employed or not.

“So I don’t think the self-employed are underserved in today’s market.

“There is no doubt that things are going to become more difficult because of the need to prove income, but lenders are still lending and the products are still there.”

She also addressed the lending into retirement issue, where lenders are reportedly restricting borrowers over the age of 40 taking out a mortgage with a 25-year term.

She added: “The proportion of loans that extend until they are over 65 continues to increase.

“All lender types are lending into retirement – there has been a steady increase in the number of sales to over-65s.

“Although it’s fallen a little bit the percentage of transactions where the borrower was over 70 was still 6% at the end of last year.

“Our rules are not designed to stop lending to older consumers. What matters to us is that the borrower can afford to pay the mortgage whatever their age.

“I don’t think lending policy has changed – I don’t think it’s changed at all. The majority of lenders have always had maximum age at maturity.”

Blackwell acknowledged that many lenders are reluctant to lend beyond the age of 70 to 75 but said it was for “quite legitimate” reasons, such as the extra expenditures that come with age such as care costs, affordability issues if the borrower dies and mental capacity issues.

She also spoke of mortgage prisoners, but she blamed the epidemic on irresponsible lending before the credit crunch, as she said: “It’s not the MMR that created these mortgage prisoners, it’s the poor lending standards of the past.

“We are all going through that painful process.

“Interventions are all aimed at ensuring we don’t have to go through anything like this again. We really need to learn the lessons of the past.”

And on the reduction in interest-only lending Blackwell said it should always be a niche product for wealthy borrowers who can safely pay off the loan at the end of the term.

Blackwell emphasised that MMR is a long-term policy which will only kick in going forward.

She added: “The MMR is actually not going to have any impact. Lenders are voluntarily imposing constraints on the market.

“The MMR is designed to bite when the market starts to pick up, lenders start to compete in criteria, we see a noticeable move up the risk curve.

“The MMR is for the future.”

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