Lenders going overboard on MMR caution

In April brokers were said to represent 80% of the mortgage market due to a slowing down of the high street and telephone call centre distribution channels.

Major lenders, in particular the largest six which account for 80% of the market, are said to be tightening their lending criteria generally as they lack the resources to individually underwrite cases.

Gammon said: “What is now in place was not the intended outcome of the FCA.

“Lenders are so very nervous of breaking what they perceive to be the new FCA rules they have in effect gone overboard on the underwriting requirements for a mortgage application.

“The level of scrutiny each application is receiving is probably unviable in the long-term and I am witnessing mortgage application times very quickly spiralling out of control.”

But Jeremy Duncombe, director of Legal and General Mortgage Club, said: “What’s happening is lenders are putting new systems in. New systems take time to bed in so underwriting and processing will speed up again.

“From our point of view we have seen a slight slowdown in terms of turnaround times however the demand is still there and we feel that MMR has had a minimal impact in terms of restricting volume.”

Toni Smith, sales operations director at First Complete, speaking in this month’s edition of Mortgage Introducer, agreed that levels of scrutiny are unsustainable.

She said: “I think that lenders will potentially ease some of their criteria once things settle down and they have a clearer understanding of the impact of MMR.

“Indeed it will be interesting to carry out a comparison in six months’ time to look at how criteria differ then.

“I don’t think it will be practical for lenders to scrutinise every application to the levels that are currently being proposed with the current level of underwriting staff.

“If the criteria are not relaxed, some lenders may well need double the amount of underwriters they have in order to continue to look at this level of detail.”

Gammon stated that problems and delays are most evident in high street and telephone call centre distribution channels.

He added: “Pre MMR, if you contacted a high street branch of your bank, you could expect an appointment within a day or so of you requesting it and a mortgage application meeting to take around 45 minutes.

“However under current conditions I am hearing frequent tales of these meetings lasting up to three hours, the result of which is that appointments often need to be booked up to three weeks in advance – clearly unhelpful for house buyers.

“The third distribution channel is through brokers and while they too are struggling with the processing delays, they can at least help a prospective borrower navigate through the current conditions.

“In addition those who are well-connected can also attempt to get your application prioritised, or at least recommend a lender where the problems are less severe.”

Jeremy Duncombe agreed that brokers are taking a greater market share, estimating that they have taken a minimum 65% of the market.

He added: “The broker market has definitely increased in terms of share and lenders are seeing the value of the intermediary market.”