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MMR: a year to go! So, how are lenders faring?


Published: 24 April 2013 | Author: Bernard Clarke

There is now just over a year to go until proposed implementation of the final rules emerging from the mortgage market review. So, how are firms progressing? First of all, lenders are grateful to have been given 18 months to introduce the new rules. There are, however, huge challenges in meeting the timetable for implementation, not least as firms now face another deadline – helping to launch the new Help to Buy mortgage guarantee scheme by next January.

We are now working with the Treasury to finalise the mortgage guarantee element of Help to Buy with a view to its introduction just four months before the new lending rules. For the rest of this year, they will therefore be working in tandem on two separate, but complex, initiatives. 

Initial feedback from lenders suggests that they have concerns about the pressures on their resources and their ability to deliver Help to Buy at the same time as moving towards implementation of the new lending rules.

The new mortgage rules

Following publication by the Financial Services Authority (FSA) of its consultation paper last October, the new mortgage rules are due to come into effect on 26 April next year. Originally, it was envisaged that implementation would be within a year of the paper. But the extra time has been crucial for the industry. 

We have spent much of the first six months working with the regulatory authorities and firms to clarify the policy intention behind some of the rules to ensure consistency of interpretation. Throughout this process, we have been grateful for a collaborative approach between the industry and the regulatory authorities.

The new rules will bring about significant changes, particularly to processes for advising customers and for the sale of mortgages on an execution-only basis. Understanding the intentions of the FSA – a body which has itself been in the process of transforming into a new regulatory authority, the Financial Conduct Authority (FCA) – has been a major challenge.

Firms have now begun putting into place systems to operate the new rules, and are working closely with the FCA’s implementation team and their supervisors. They will soon enter the first phase of the regulator’s process for tracking the progress of firms in making themselves ready.

Clearly, implementation of such a comprehensive series of rule changes puts pressure on the resources of lenders. Firms have to prepare for the introduction of the new rules, and for Help to Buy, while continuing to do business with new and existing customers. There is real competition for resources.

What’s next?

With a year to go until the new mortgage rules come into force, it might seem that firms have plenty of time. But there is a lot to do – and many competing pressures in implementing major, overlapping reforms. Some of the effects may not be clear until later in the process, but we will continue to build on collaborative relationships with the FCA and the Treasury in bringing in the new mortgage rules and the Help to Buy initiative as smoothly and efficiently as possible.