31 October, 2014
Now that the industry has had time to digest the regulator’s proposals for the second charge market, Loan Introducer speaks to Robert Sinclair, chief executive of the Association of Mortgage Intermediaries and Association of Finance Brokers about his take on the landscape ahead.
Q: Are the proposals what you expected?
A: The FCA has been giving very clear signals to the AFB for some time about how IT would implement the Directive, should Treasury make the decision to make them the enabling authority. Because of this the proposals are very much as expected with seconds incorporated into the first mortgage regime. Because the mortgage regime has already implemented MMR, this will test the seconds industry as they have to come to terms with evidencing income, assessment of committed and essential expenditure to ensure affordability, stress testing of pay rates and increased levels of disclosure. Whilst expected these are big challenges as well as the Training and Competence requirements and the need to introduce the ESIS and new APRC calculations.
Q: Do you think any of the proposed rules will harm the industry in any way?
A: It is clear that debt consolidation will become more difficult and there is a chance that some mortgage brokers may decide to restrict their service to exclude seconds from their scope of service. The landscape will change as firms make commercial and risk based decisions on what parts of the loans and mortgage landscape they choose to embrace.
Q: The FCA estimates the proposals will result in a 20% drop in business, do you think this is a conservative estimate?
A: Our instinctive reaction is that this might be an under-estimate. Whilst brokers will have a view on this it will depend on how the lenders implement the affordability rules to comply with the new regime – thus this is a question better directed at lenders.
Q: How will the proposals advantage the industry?
A: Many mortgage advice firms will bring “seconds” into their scope of service and this will lead to more consumers being considered for this solution, rather than being recommended a re-mortgage.
Q: Will you be campaigning for anything to be removed/changed from the consultation paper?
A: We think that the more onerous requirements on seconds for debt consolidation might be excessive. We will be responding that there should be the same approach for both first and subsequent charge loans, as the same set of controls should be appropriate for all types of customer and loan.
Q: If the rules go ahead as proposed, will AMI and the AFB become one?
A: AMI and AFB are already close. Once the regulatory regimes are merged then there may be an argument to bring the two organisations together. It is why AFB has a representative on the AMI Board. We will continue to review this and take feedback form members in both organisation before making any decisions.
Q: Do you have any advice for seconds’ brokers who may be worried about the impact the rules will have on their business?
A: Be members of AFB, attend our meetings and read what we publish. This will help ensure that they are in the right place as part of an industry that is acting in the best interests of the consumer and complying with the legislation and regulation.
Q: How do you envisage the mortgage/seconds market in the next five years?
A: My crystal ball is very cloudy on this one – it is too early to tell how firms are going to react to the new rules which will only be finalised in March 2015.