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The Future of Mortgage Regulation and Niche Lending

Tim Dawson, Chairman of the IMLA, discusses the evolving landscape of mortgage regulation and niche lending in the UK. He highlights the FSA's objectives to enhance consumer protection, ensure market confidence, and address financial crime. The presentation includes insights on the effectiveness of current mortgage regulations and the need for improvements in consumer information. Dawson also analyzes the growing importance of e-commerce in the mortgage sector and the potential for niche lending markets, emphasizing the shifting priorities in lending products and services.

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The Future of Mortgage Regulation and Niche Lending

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Presentation Transcript

  1. The Mortgage Event Vision of the Future Tim Dawson Chairman IMLA

  2. Vision of the Future • Content • Regulation • e-commerce • Niche Lending

  3. Role of FSA The FSA has four statutory objectives: • market confidence: maintaining confidence in the financial system; • public awareness: promoting public understanding of the financial system; • consumer protection: securing the appropriate degree of protection for consumers; and • the reduction of financial crime: reducing the extent to which it is possible for a business to be used for a purpose connected with financial crime. With the aim: • To promote efficient, orderly and fair markets and to help retail consumers achieve a fair deal. Source: FSA Website - What we do

  4. Objectives of Mortgage Regulation To enhance consumer protection in two key ways: 1. Improvements to information about mortgages made available to borrowers, achieved through: • rules on financial promotions, designed to create high standards in product transparency • pre and post sale disclosure documents, to enable consumers to acquire clear information specific to their circumstances and in a standard comparable format • provision of comparative information and consumer education to help in the early stages of shopping around, and to raise understanding of mortgage products • measures to improve information provided to those facing arrears and repossession Source: FSA website - Mortgage Regulation

  5. Objectives of Mortgage Regulation (2) 2. Mortgage lenders need to be authorised by the FSA and to meet the following high level standards: • Threshold Conditions set out in the Financial Services and Markets Act (FSMA) • senior management responsibilities • systems and controls Source: FSA website - Mortgage Regulation

  6. Mortgage Regulation Has Mortgage regulation achieved these objectives?

  7. Cost Effective ? • 40% of Intermediaries costs increased by 10% • 21% of Intermediaries costs increased by 20% • Costs to implement MCOB  £200m • MCOB annual running costs £75m - £150m

  8. Better Decision Making ? • 86% IMLA members think KFI not helped or made little difference. • 60% Intermediaries think clients don’t understand KFI • 70% Intermediaries don’t think clients use KFI’s to compare products

  9. Better Decision making ? • 68% of Intermediaries don’t believe clients get better advice post Mortgage Regulation • 72% of Intermediaries don’t believe clients benefit from Mortgage Regulation

  10. Objectives of Mortgage Regulation Improvements to information about mortgages made available to borrowers, achieved through: • Financial promotions ? • Enable consumers to acquire clear information specific to their circumstances and in a standard comparable format ? • Help consumers shop around NO • Improve information provided to those facing arrears and repossession ? • Cost effective NO

  11. MCOB Impact on Market Structure • More DR’s than expected • Few networks disappeared • Shortage of AR’s • No clear sign of market shake out yet

  12. The Future • FSA Plans: • Cost benefit review - 2006 • Review of KFI - 2006 • TCF

  13. The Future • What the market would like: • Review of MCOB • Simplify regulation • Reduce cost • Involve / work with the industry

  14. E - Commerce

  15. E - commerce business levels

  16. Online Growth Average online business: • Now 38% • In one year 47% • In 5 years 80% ?

  17. Niche Lending

  18. Niche Lending - Current Intermediaries think niche lending is: • Extremely / very important 45% • Quite important 35% ____ “Important”80%

  19. Niche Lending - Future Intermediaries think: • Much / a little more important 64% • Less important 3%

  20. Niche lending - Products Current importance of individual markets: • Self Cert 21% • Buy to Let 13% • Sub prime 11% • 100% 6% • Equity Release 6%

  21. Niche Markets - Growth Growth of Individual markets: Equity Release +6% pa Self Cert +5% pa Sub prime +5% pa Buy to Let +3% pa

  22. Niche Lending - Importance

  23. Niche Markets - Conclusion • Equity Release will become a major market • Self Cert will remain important • Buy to Let much less important

  24. Q & A’s End and Thank you

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