FCA: Borrowers' wings were clipped pre-MMR

Speaking at the Financial Services Expo in Glasgow, Blackwell responded to a study conducted by the Intermediary Mortgage Lenders Association, which revealed in February that three quarters (74%) of brokers think the market has become too conservative, as 84% were unable to source a mortgage for at least one client in the six months to January.

Blackwell said: “MMR came into play on 26 April 2014, although it is generally accepted that most lenders implemented the new rules long before that – and I don’t think, for credit adverse borrowers, there has been any perceptible impact as a result of the MMR.

“What happened to this market happened post-crisis, not post-MMR. That’s when lenders’ risk appetite changed dramatically and actually, lending to the credit impaired has remained pretty consistent.

“It is hardly surprising that it’s a struggle – it is high risk lending and lenders are wary of going there. It’s wrong to point the finger at regulation and MMR when the pull back from this happened six years ago.”

She painted a similar picture for interest-only, which she said is becoming a niche product for wealthier borrowers as lenders have become more responsible.

Blackwell also defended the regulator’s stance on lending older borrowers. Even though she admitted the FCA has limited such lending, she added this “isn’t conservative lending, but responsible lending”.

Blackwell said: “In the interests of ensuring a sustainable market in future, the MMR rules are not going to allow lenders to go back to the lax standards we saw pre-crisis.”

“That means, however, that many of today’s borrowers’ choices are going to remain constrained as there is a mismatch between their risk characteristics and what’s actually available in terms of products.

“There’s no doubt MMR has had an impact on the market, and the intermediary share of transactions grew to 62% by the end of last year.”