Robert Sinclair “astonished” at FCA’s mortgage prisoners rule changes

Michael Lloyd

July 10, 2019

Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI), was astonished by the way the regulator relaxed affordability rules to help mortgage prisoners.

He was speaking this morning at a Westminster Business Forum Keynote Seminar about ‘‘The UK mortgage market – sector growth, regulating lending practices and the future for ‘Help to Buy’’.

Sinclair (pictured) thought seven or eight lenders would agree to take these mortgage prisoners off the back books of other lenders, with a small group of brokers working with them to facilitate that change.

He said: “We were astonished when we got these rule changes saying we weren’t going ahead with this special project [to use brokers to switch mortgage prisoners] but the affordability calculations to remortgage changed for all lenders.

“This would slow the whole thing down enormously. We now can’t deliver the right solution. The regulator still doesn’t think in simple consumer points. They’re frightened of their own shadow.”

The FCA will move mortgage prisoners onto a ‘relative test’ rather than treating everyone as a new customer. This is to make sure people who aren’t borrowing more can switch to a mortgage more affordable than their current one.

Sinclair also predicted that in the future remortgages and product transfers will be online-only, but intermediaries will still be needed.

Sinclair added: “Lenders are wonderful, but intermediaries are more than wonderful, they’re the oil that makes this all work. They’re the people that help the consumer understand what’s happening and make the whole thing work effectively.

“I think the challenge for this is remortgage and product transfers will effectively become online only. It’ll only be on the outer edges, for example, people with more than one job, those in the gig economy and those buying a non-standard property who will need that help and support.

“The first-time buyers market generally needs the most help. Actually, the FCA in their mortgage market study said they want the customer to make choices. Our research says the customer wants to use data capture but want to spend time talking to an expert telling them they’re doing the right thing.”

Furthermore, Sinclair warned of the FCA’s stance on execution-only.

Recently the regulator proposed changes so tools that allow customers to filter and search available mortgages are not necessarily giving advice, to make it easier to offer execution-only options to borrowers.

Sinclair said: “That desire from government and regulator to empower consumers is a challenge to the industry. The idea a lender can now incentivise consumers not to take advice by offering a cheaper product is quite dangerous for me.

“Non-advised exists in protection, not in mortgages. In mortgages it says execution-only or advised. How we make that work will be a challenge in the industry.  But this space is one of innovation and structure.”

Orla Shields, chief executive officer and co-founder, GetRentr, added: “I don’t think it’s a smart move to discourage advice.”

Meanwhile Paul Broadhead, head of mortgage policy at the Building Societies Association (BSA), was pleased with the product innovation he’s seen in the market, such as family offset mortgages.

But he said the Financial Policy Committee’s rule that lenders have to stress test at 3% above the base rate means many people who are renting can’t afford a mortgage.

The FCA was approached for comment.

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