FSE: Lenders need ‘common sense’ on MMR

At Emirates Old Trafford Lynda Blackwell, part of the mortgages and mutuals team at the regulator, announced that the world has kept turning after MMR came into play on 26 April.

She said: “Overall things seem to have gone as the market expected.

“There have been some IT glitches with some firms faring much better than others.”

However she added that more ‘common sense’ is needed in terms of underwriting as some lenders are going beyond what is required.

Lenders should include three basis expenditure areas in their detailed look at borrowers’ affordability – contractual payments, basic essentials and basic quality of living costs, but beyond this Blackwell said “it’s entirely up to the lender what they ask the borrower about their expenditure”.

She added: “We look at some of the questions being asked and wonder why?

“It would be good to see common sense prevailing in the market and I’m sure it will do.”

The FCA would also like to see more common sense with product switching, where borrowers could move from an expensive standard variable rate to cheaper a fixed rate.

Blackwell said: “It’s too easy to take advantage of your existing back book. Existing borrowers should not be unfairly prejudiced just because they are trapped.

“We would like lenders to follow the spirit of the rules but it’s difficult to do anything if they don’t.”

Blackwell highlighted the FCA’s concerns about lenders outside the top six, suggesting that some may try and circumvent MMR by looking at non-residential lending areas such as bridging or secured loans.

And she added that in future the authority would like to assess all uses of credit.

She said: “We have an opportunity to review and assess the way consumers use credit – all types not just the mortgage but other secured lending and credit cards.”

The FCA has been concerned that borrowers can pass affordability checks and secure a mortgage before taking out credit cards, second-charges and other types of credit which “increase the debt levels massively and the mortgage implodes”.