Mortgage Shop welcomes lender review
The province’s largest mortgage broker has welcomed a major shake-up in the mortgage-lending sector that will come into effect later this month.
According to Siobhan McAleer, founder of The Mortgage Shop, which has 16 branches across Northern Ireland, The Mortgage Market Review spearheaded by the Financial Conduct Authority will ensure there is no return to the ‘irresponsible bank lending of the past’ which has resulted in record numbers of home owners finding themselves in negative equity.
As a result of The Mortgage Review mortgage advisers throughout the UK must now build up a much clearer picture of the borrower and affordability levels both now and in the future. The changes, which come into effect on 26 April, will apply to all lending institutions, including banks, building societies and brokers.
“House hunters and first time buyers should expect a more thorough mortgage application process incorporating a longer, more in-depth interview with bank statements thoroughly checked to verify monthly expenditure and how changes to circumstances could impact on their ability to make repayments. For example, if a couple are planning to have children, this is relevant in terms of their application or if interest rates were to rise we must establish how this will affect their ability to make repayments.”
From a broker’s point of view there will be a greater degree of accountability with all advisors required to have the required industry standard qualifications and accreditations. All institutions will also be required to have robust supervisory processes in place to ensure the new guidelines are followed.
“The days are gone when advisors, many of whom were based in local banks and some other high street financial institutions, operated on a ‘non advised’ capacity and were not required to make a recommendation to a borrower. They simply presented the features of various products, i.e. whether they were fixed, variable, discounted and then allowed the customer to choose. There was therefore little if any real accountability on behalf of the financial institution if the product chosen was found later to be unsuitable.
“The Mortgage Shop has always operated in an ‘advised’ capacity. However the implementation of MMR has meant significant investment in a more comprehensive governance system and intensive training in the assessment of affordability.
“The new procedures mean the onus is firmly on the adviser to ask sufficiently probing questions to allow them to make both suitable and affordable recommendations to the customer. As brokers, we need to treat the money as if it is our own,” says Siobhan. “There is no doubt that these more robust processes will offer better protection for consumers. The concern is that the cost of these changes could ultimately be passed to the consumer in the form of increased costs such as larger administrative fees.”
Siobhan continued: “It is up to each broker firm to decide on the levels of competency for their advisers. A Mortgage Shop adviser needs to complete a minimum of 40 mortgages per year to automatically retain their ability to offer or customers mortgage advice. We believe that unless an adviser specialises in mortgage broking their ability to carry out the role competently is under question. This will be further reinforced by the audits that will be regularly carried out by lenders on the quality of applications submitted by brokers. The quality of mortgage applications will be highly policed and if an adviser, or indeed a firm, is found to be below the required standard, a traffic light system of warnings will be implemented, which could lead to them having their panel appointment suspended or indeed revoked.
“This could well be the death of the small broker. With lenders having to know their intermediaries better under the new rules, it may no longer make commercial sense to deal with a broker who only has the capability to complete two or three mortgages every once in a while. However, overall we believe this is a positive move for the industry and can only lead to greater stabilisation and less volatility with home buyers getting better quality advice.”