Mortgage regulations will limit access for consumers

The Intermediary Mortgage Lenders’ Association says lenders are most worried about availability of qualified advisers whilst overregulation tops concerns among brokers.

Peter Williams, executive director of IMLA, said: “As MMR inches closer to reality, we are understandably witnessing a change in tune from last summer across the industry. The market is still in its early stages of recovery, and there now seems to be a growing consensus that the new regulations will have at least an initial dampening effect. In the short term, we are facing a likely drop in mortgage approvals as new practices are set in stone and while any remaining gremlins in new IT systems and processes are ironed out.”

Intermediary mortgage lenders and brokers are continuing to express concerns about the immediate impact of new affordability checks for borrowers, resulting from the Mortgage Market Review which becomes fully operational two months today.

Research by IMLA reveals 46% of mortgage brokers are worried about the impact MMR will have on the market – up from 34% in July 2013. By contrast though nearly two thirds of lenders (64%) are still raising concerns about the impact of the new regulations, this is down from 67% in July 2013

IMLA’s Intermediary Lending Outlook shows that five out of 10 brokers anticipate more mortgage applications will be turned down due to the new stress tests, which will examine whether borrowers could afford their repayments in the event of interest rates rising. This compares to 44% who thought the same in July 2013.

Similarly the number of lenders who are confident the affordability checks will not significantly impact borrower numbers has fallen from 73% to just 43%.

Responsibility for affordability checks will officially pass from brokers to lenders when the MMR comes into effect on 26th April. While many changes have already been phased in ahead of the transition date, concerns remain about its immediate impact.

The primary concerns among lenders are the availability of qualified advisers (57%), coupled with challenges in communicating affordability requirements to customers, brokers and regulators (50%). Over a third (36%) have concerns about the practicalities of implementing the new regulations, pointing to changes in IT systems and process as well as issues of costs and efficiency.

Brokers on the other hand are most concerned about confusion arising due to overregulation (53%), their changing relationship with lenders (35%) and consumer access to mortgages suffering as a result (35%).

Williams added: “Lenders’ concerns about the availability of advisers and communicating affordability measures are perhaps unsurprising given they are primarily responsible for the new checks. However, many are ready for MMR and focused on ensuring as smooth a transition as possible.

“These changes are have been two years in the making and place affordability as well as transparency, at the forefront of the market’s recovery. We may witness an initial lending slowdown, but the changes are in consumers’ best interests and are based on fairness and responsible lending. It is vital to ensure borrowers can manage their commitments – both in the short and long term. But as new working practices bed in, we must also remain alert to any loss in the e flexibility to treat customers as individuals as a consequence of increased vetting.”