In the days leading up to the MMR, John Penn, head of mortgage proposition at leading software provider Intelliflo, gives his predictions on what the post MMR mortgage market will look like.
Since the start of the year, there has been increasing commentary on the MMR, the impact it will have, and how ready lenders and mortgage advisers actually are for the changes. Despite this, the overriding opinion is that the new regulations should prove positive for the industry as a whole. Mortgage advisers in particular are optimistic about the rules, with 72% believing that the MMR will be good for their business.
So whilst the industry feels largely prepared for the upcoming regulation, what will it actually mean for the shape of the mortgage market across the UK?
From the end client’s perspective it should mean that the advice is both more transparent and in depth. Although this may be coupled with a longer application process, more questions asked and checks completed, ultimately applicants should see a benefit in terms of the service they receive.
Adviser/client relationships are likely to become stronger as mortgage advisers will need to obtain a greater understanding of their client’s needs. Whilst this may mean an increase in application times, clients will find that the selected product will be more suited to their specific needs.
This extra leg work at the beginning of the process, when carried out properly, should result in higher approval rates as lenders receive all the information they require to make decisions from the start.
It will not just be the client/adviser relationship that benefits as one direct impact that the MMR is likely to have is an improved relationship between the lender and the mortgage adviser.
There will need to be more communication between the mortgage adviser and the lender, as advisers will need to ensure that they are aware of all the lenders’ latest requirements.
With lenders’ responsible for approving affordability under the new regulations, they will increasingly be looking to mortgage advisers to provide them with detailed information on applicants and carry out rate shock tests to ensure that their clients would be able to afford mortgage repayments in the future, as well under their current circumstances.
As a knock on effect, the quality of applications submitted will improve, and it is possible that we may even see the introduction of tiered procuration fees, with lenders paying less to mortgage advisers who submit substandard forms.
In terms of market-share post the MMR, we may see a slight shift again in favour of the mortgage adviser, potentially going as high as 70%-30% versus direct business.
However, as the market settles down in the back half of the year and lenders get to grips with the new regulations, it should mirror last year’s 60%-40% split.