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the customer?” she asks. “For the regulator to do that with their objective of customer protection I struggle with that – it seems really strange. “There are more and more firms developing online advised proportions and they give the customer full protection, help and support to give them the product that’s appropriate, and have the protection of Financial Ombudsman Service.” Payam Azadi agrees that focus should be placed on advicebased services. “There’s been huge strides made in the way brokers deal with business since MMR,” he says. “Why reverse that when you can enhance the process? “I think it’s worrying. There’s no doubt technology needs to play a bigger role in the way consumers interact with financial services. “Rather than go down the nonadvised route, use technology for the advice process. “That seems to be a sensible way, so you’ve always got accountability and reassurance that advice has been given but using a hybrid method to interact more and put clients in charge of the information.” David Hollingworth foresees a time when there’s more eligibility and filtering tools, while he expects advice to eventually be delivered digitally. However he thinks other areas of the housebuying process need work, rather than advice. “For me, on the technology piece, the technology breakthrough will be if you can buy a property and enable every part of that process to be online in terms of Land Registry, exchanging contracts, completing, so all those third parties in that process can do it online quickly,” he says. “That advice process is not a tedious one – the tedious bit is the rest of the transaction that takes time because of the third-party process that gets to the exchange. It can take three months.
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“It’s that process that in my view is where technology should be looking to simplify.”
Pendulum swinging back
Bob Young of Fleet Mortgages thinks that the mortgage market will eventually become overly relaxed when it comes to assessing affordability, owing to political pressure. “Think of it as a pendulum,” he says. “The pendulum swung one way and it’s now swinging back again. “Politicians don’t like MMR, because they have constituents come in saying ‘my son is earning £1,500 a month and can’t afford a mortgage of £1,000 a month’. “Any administration in the country would want to make homeownership as easy as possible. There’s so much pressure for it to ease that it will. “Do I think poor lending practices will come in? Absolutely. It’s not if, it’s when.”
“Boulger thinks the big challenge for the FCA in the years ahead is understanding and dictating what constitutes advice and what doesn’t” Young says something will replace the likes of ‘self-cert’ as a means to engage in risky lending. Open Banking could, in theory be used as a way for lenders to automate lending for example. When reflecting on the future, Lynda Blackwell admits an apparent short-termism in the market is something she fears more than ever. “In the longer-term, again and again the market has been shown it can’t be trusted to do the right thing for the customer,” she says. “When lenders and brokers are left to their own devices there’s a tendency to do things their own way. “The regulator stepping back from all the rules in place is surprising – it’s almost as if the FCA isn’t remembering lessons
from the past.” After the madness of the precredit crunch market, creating a largely advised sector was the easiest way to ‘clean up’ the market. Clearly the previous MCOB regulation was substandard to say the least, as it allowed financial institutions to focus on making a profit above all else. In response the Mortgage Market Review was clearly a great success, even if some people struggle to pass tighter affordability rules nowadays. Given that the repossession count reached a 40-year low in 2018, UK Finance data shows, it seems the FCA achieved what it set out to do – and it is now operating from more of a position of strength in a market with fewer repossessions. Rightly or wrongly, the FCA now seems to want to empower consumers with technology to help them make decisions without an adviser’s help. For the regulator, the key is making sure this is for the right people and they are wellinformed, to prevent people from causing their own downfalls. Given that buying a house is the most expensive transaction most people will ever make, for inexperienced buyers it seems most sensible to be guided through the process by an adviser. That seems unlikely to change, and if first-time buyers in particular started to snub advice that would be a worrying trend – though the FCA would be daft to let that happen. As a result of this direction of travel however, advisers need to promote the good work they do to encourage customers to go with their expertise. Regulation never stands still, but hopefully the FCA doesn’t forget the lessons from the past and listens as well as act when altering rules and regulations. History tells us that the behaviour of regulators can have a drastic impact on how markets evolve, for the better or worse.
OCTOBER 2019
MORTGAGE INTRODUCER
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