MMR must not derail fragile mortgage activity

Nia Williams

February 11, 2010

AMI is concerned that the review does not adequately consider its impact on how consumers buy and sell property. AMI also warns that the proposals, which focus on a minority of consumers, have the potential to adversely affect the majority, who are responsible consumers.

In releasing its response to the FSA Mortgage Market Review discussion paper, AMI has called for:

• More consumers to have access to mortgage advice

• Lenders to retain ultimate responsibility for assessing affordability

• FSA to not restrict higher Loan To Value (LTV) and Loan To Income (LTI) mortgage products, so as to not limit equity withdrawal or apply unnecessary controls over debt consolidation

• Procuration fees to remain as a remuneration option and the decision on remuneration to be agreed between the customer and the adviser

• FSA to recognise the fundamental differences between fast-track and self-certification mortgages and ensure that fast-track mortgages, which are appropriate for low-risk consumers, are not banned

Robert Sinclair, director of AMI, said: “The vast majority of consumers have been well served by the mortgage market. We are concerned that the proposed changes, which will protect a small minority, will substantially impact on the choices of the vast majority of consumers. The regulator needs to be mindful of negative unintended consequences that regulation could have on a market still in a state of recovery.

“Consumers benefit from advice when committing to such a significant financial transaction. Too many customers currently purchase a mortgage direct from a lender without advice and this cannot be in their long-term interests. The regulator must do more to ensure that consumers have access to advice on the most appropriate product when considering their financial future.

“Flexible remuneration options benefit consumers. A one-size-fits-all approach cannot be of benefit to people with drastically different financial circumstances and is likely to limit access to advice. With this in mind we support FSA in not introducing alternative charging models into the mortgage industry.

“Responsibility for assessing affordability and the decision to advance funds must remain with the lender. In order to appropriately ascertain the suitability of a mortgage product, an adviser must assess a borrower’s affordability. However, this is based on information from the customer and does not include credit checks and other classified data, which is available to the lender.

“This assessment should be undertaken before introducing the range of products available and should be the same whether conducted by a lender representative, an intermediary or on a non-advised, information only basis.”

Robert concluded: “First and foremost we need to think about how regulation will affect consumers. Appropriate controls are necessary, but consumers must not be penalised through an artificial limitation of their choices.”

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