UK Finance logo

This website is closing. Please visit for all UK Finance member-only mortgage information.

You can access the UK Finance Mortgage Lenders’ Handbook here.


Published: 1 July 2014 | Author: Bernard Clarke

In our main article today, Stephen Noakes, the chairman of the CML and director of mortgages at Lloyds Banking Group, reflects on life in the mortgage industry in the immediate aftermath of the mortgage market review (MMR). 

After a workload amounting to millions of man-hours, and with hundreds of millions of pounds spent on implementation, what is the early verdict? Stephen tells us what the MMR has meant for mortgage interview times, and the time that customers have to wait for an appointment to see an advisor. He reports on the early feedback to the new rules, from customers and brokers. And he poses an important question about the impact of the MMR on remortgaging. Is it in this section of the market that the MMR could have its biggest impact - with more widespread exclusion of borrowers seeking to consolidate debt?

Across the industry, the implementation of the changes required to meet the new regulations emerging from the mortgage market review (MMR) was no small task. Millions of man-hours, 18 months of planning, hundreds of millions of pounds of investment in systems and the training of thousands of advisers all came together to meet the 26 April deadline.

Different lenders deployed their new systems, processes and staff at different times, and on the whole the implementation was successful. The technology has worked, and the market has remained open for business.

As with any large industry-wide change, impacts to service levels were predicted, and expected. Lenders were able to prepare for this though, minimizing the impact on the customer with the significant investment and training that was previously mentioned.

The new process necessitates longer interview times, but these are not excessive. In the case of main mortgages, applicants are speaking to advisers for about 20 minutes longer than they were pre-MMR, but we must remember this is in an interview that was taking an hour and 45 minutes previously.

As those advisers working with the new systems get used to them, there have been some examples of longer waiting times for people who want to see an adviser. Once again, however, this is returning to normal, with the vast majority getting an appointment at their convenience within a couple of days.

As a result of the swift adaptations that have been made, the mortgage market has not ground to a halt. The CML acknowledged recently that there has been a slowdown in activity levels, in part associated with new mortgage rules which have disrupted the norm, but it is unclear how lasting this will be and, as mentioned previously, it is clear that the market is still very much open for business.

CML market commentary, June 2014

"Our forward estimate is that gross mortgage lending in May closely matches the £16.5 billion seen in April (which) would represent a material softening of the pace of recovery.

"The new MMR rules have almost certainly played a part, but their market impact is far from clear at this stage.

"Implementation of the new regulatory regime is likely to have disrupted the normal patterns of activity, creating statistical ‘fog’ around the published figures. As this lifts over the coming months, a clearer picture as to any lasting impact of the MMR rules on lending activity should emerge."

What do customers think?

A key early measure of success is the feedback that we’re gathering from those involved in the post-MMR world. What are customers, advisers and brokers reporting?

Customers are now providing strong feedback that the behaviours and service levels of advisers are returning to pre-MMR levels, and that post-MMR advisers are now showing a better understanding of customers’ needs. The understanding of the application process is also improving, with the vast majority of customers stating that they agree with the advice they are given and that it meets their budget. This is important to the customer, the lender and Financial Conduct Authority (FCA).

The feedback we’re receiving from direct advisers at Lloyds Banking Group is that the new approach feels more intuitive and, separately, brokers are reporting that the systems are working well. This positive early feedback is a good yardstick, and is a clear contributor to the initial success of the MMR and the fact that there has been very little significant negative coverage of the changes in the media.

And what is the impact on the market?

We need to be mindful that a variety of things can impact the latest reported figures of activity, but there is no doubt, as mentioned previously, that applications have been impacted slightly, as a result of the industry going through this major transition.

There has been a bigger impact on the remortgage and further advance markets, where direct channels have a greater share and where stresses on capacity can have a greater impact. However, critically, there is less impact on the house purchase market which is vital on many levels, not least to keep the wider economic recovery continuing across the country.

There has been a bigger impact on the remortgage and further advance markets. Will we see longer term impacts as the affordability changes bite harder on this segment, where debt consolidation is often a key customer driver?"

The remaining question for the remortgage market is whether or not short-term capacity is a key factor in the performance of this market, or whether we will see longer term impacts as the market-wide affordability changes bite harder on this segment, where debt consolidation is often a key customer driver.

What lies ahead?

The view from the FCA is that they are pleased with the initial implementation. A thematic review is due in the third quarter of 2014, where there will be scrutiny on the outcomes that lenders are delivering for customers after the changes have been embedded.

This provides the industry with an opportunity to discuss the impact of MMR after an appropriate amount of time. The elements that are working well can be highlighted, and focus can also be drawn towards the potential changes which may have a greater impact than the benefits that are gained.

As the dust settles on MMR, there is still some uncertainty around what lies ahead. What impact will there be from the intervention in the housing market by the Bank of England's financial policy committee? Is there an opportunity to influence the European mortgage credit directive? What policies will the political parties decide upon to solve the UK housing crisis in the run-up to the general election?

These questions will keep the market on its toes, and also ensure it stays in the spotlight. So far in 2014, the market has adapted well to the changes it has needed to make. It is great to see the co-operation of those involved in the industry collectively to deliver the best result and keep the market open for business.