Lenders in UK praised for work on responsible lending requirements
Lenders in the UK positively applied the responsible lending requirements which came into force as part of the Mortgage Market Review (MMR) introduced in April 2014, a new report concludes.
But there is scope for improving consumers’ ability to make better choices about mortgage deals according to the Responsible Lending Review published by the UK’s financial watchdog, the Financial Conduct Authority (FCA).
It also says that some firms need to make process improvements to help them consistently assess and record their lending decisions and some could be more proactive and consistent in making use of flexibilities and exceptions to the responsible lending requirements for existing customers.
The research found no evidence that the rules have prevented firms lending responsibly to consumer groups such as older borrowers and the self-employed. However it points out that with older consumers representing an increasing proportion of the UK population it is important that the mortgage market continues to develop a range of products that can meet their needs.
Potential issues relating to lending to older borrowers will be included in wider work on the ageing population being undertaken by the FCA.
The review looked at the challenges that consumers face in making effective choices, particularly when it comes to assessing and acting on information about mortgage products, with intermediaries being key to the process.
It also examined if there are opportunities to make more effective use of technology in the provision of information and advice and commercial relationships between different players in the sector’s supply chain, in particular the use of panels, that might give rise to competition concerns.
The FCA will carry out further work where there is greatest scope for competition to improve consumer outcomes. In particular, it will launch a targeted market study in the fourth quarter of 2016 focused on consumers’ ability to make effective choices, with a view to improving how competition works in consumers’ best interests.
According to propertywire, “This study will try to determine if the available tools for helping consumers make choices, such as price comparison websites, best-buy tables, and advice, effectively meet their needs.”
‘For millions of consumers a mortgage is one of the biggest financial transactions they will enter into in their lifetime so it’s encouraging to see firms embrace the spirit and the letter of our rules,’ said Christopher Woolard, director of strategy and competition at the FCA.
‘At the same time, there appears to be more to be done to improve competition in the mortgage sector. Competition can play a key role in ensuring that the sector works well, delivering lower prices, better products and choice, and more innovation,’ he explained.
‘Based on the evidence we’ve collected so far, we intend to launch a forward looking market study later on this year, with particular focus on the roles played by intermediaries and panels,’ he added.
The Council of Mortgage Lenders welcomed the review and pointed out that members are already working on certain areas such as improving consumers’ ability to make better choices about mortgage deals.
‘We are pleased that the regulator has identified no significant faults in the market. This is testament to the level of commitment that lenders showed in implementing the new requirements that emerged as part of the Mortgage Market Review,’ said CML director general Paul Smee.
‘Through our voluntary transparency initiative, working jointly with Which?, we are fully engaged with the consumer choice agenda that the FCA identifies as an area for study later in the year. We are already looking to make the kind of progress that will make it easier for consumers to compare and understand their options, and look forward to working constructively with both the industry and the regulator on this,’ he added.