The Financial Services Consumer Panel has some concerns about the FCA’s proposals to simplify mortgage regulation and make it more flexible. It reminds the FCA that the 2007/8 housing market collapse was in part due to mortgages being offered to borrowers who would not meet the now standard lending requirements and criteria – and as a result many borrowers ended up becoming mortgage prisoners. The panel notes that the regulatory response has largely worked, and that this should not be forgotten.
Key observations on the actual proposals include:
- that more consumers than currently want to carry out their mortgage transactions without advice, and are frustrated that minor enquiries now route them into advised channels;
- cautioning that affordability and suitability do not mean the same thing and that removing advisory services risks losing forward-looking assessments that mitigate against the risks of shortfall – and borrowers not receiving advice should receive clear communications on what protections they will have;
- while in principle allowing borrowers to extend mortgage terms sounds like a good thing, the Panel is concerned about affordability of future payments and the need to maintain flexibility.
So the Panel is not against the proposals, but needs to see evidence that consumers would still be properly protected.