IMLA calls for mortgage regulation review

Ryan Bembridge

November 21, 2016

The Intermediary Mortgage Lenders Association has called for an independent review into the impact of mortgage regulation.

While the Financial Conduct Authority has created a market that prioritises stability, IMLA said, this has come at the expense of ‘popular’ access to mortgage finance.

IMLA said non-standard borrowers’ prospects for homeownership have been dampened, making the market less inclusive. Meanwhile lenders are caught in the crossfire between consumers with aspirations to own and politicians.

The association therefore called on the FCA’s Competition Review to recognise the role regulation plays in consumer access to mortgage finance.

Peter Williams, executive director of IMLA, said:  “While mortgage accessibility is consumers’ number one priority when it comes to getting a mortgage, there are several other important parts of the customer’s experience that have been affected by this regulatory shift.

“Some borrowers are faced with higher prices as a result of higher capital requirements, and the applications process has grown longer and more frustrating.

“As a result of this shift away from a market focused on consumers’ interests, IMLA will continue to argue the case for an independent assessment of mortgage regulation to be taken.

“It is important to ascertain whether the interest of excluded borrowers are properly weighed against the benefits of the current regulatory regime.”

Borrowers’ greatest frustration is affordability constraints according to 70% of lenders and 67% of brokers.

A total of 51% of brokers have been unable to source a loan for a client seeking an interest-only loan, 49% for borrowers with adverse credit and 46% for self-employed clients with irregular incomes.

And an August report by the Nottingham Building Society found that the biggest cause of housing transaction failures was mortgage finance falling through, which accounted for 34% of all failures.

Williams added: “Following the financial crisis, policymakers and regulators have rightly sought to increase the stability of the mortgage market through several different pieces of regulation.

“While these polices have reduced risk, they have also reduced non-standard borrowers’ ability to access the mortgage finance needed to get on the property ladder.

“In order to promote stability, the regulatory regime has effectively created a narrower mortgage market – which is bound to have frustrated the would-be borrowers affected.

“While the market is still working for borrowers with large deposits and stable jobs, Britain’s growing number of non-standard borrowers face several regulatory imposed hurdles.

“While it is hugely important that market stability is supported, it is questionable whether such a tight regulatory approach is compatible with policymakers’ goal of increasing popular homeownership.

“It is therefore hugely important that the FCA’s planned Competition Review assesses the role regulation plays in limiting consumer access to the mortgage market.”

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