What next for the mortgage sector? The recent FSA Mortgage Conference suggests that whatever is contained in the consultation paper to be released by the FSA in September, a time of considerable change lies ahead. How the industry responds to that change, and the proposals outlined by the FSA regarding future regulation of the sector, is likely to be crucial to its future.
Last week’s conference, intentionally broad in scope as the forthcoming consultation paper will be, drew attention to a range of issues which have been critical to the development of the sector and its response to the financial crisis. Various trends were highlighted and held up for scrutiny and debate, from the growth of securitisation and availability of high-risk products, to the role of brokers, and the growth of the buy-to-let market, to name but a few.
Conclusions were few and far between, but there were indications both that the FSA now regrets the decision it made when it took over the regulation of mortgage selling not to stick to its original plan that employed borrowers would not be allowed to self-certify their incomes, and that considerations are now being given to extend the FSA’s remit to cover second charge and buy-to-let mortgages.
Potential ideas mooted on the future of regulation for the sector were equally varied, and though only outlined in aspirational terms, they have already attracted much comment and debate. Among the most controversial was the FSA reaffirming that it is considering limiting the amount homeowners can borrow relative to their income or the value of their home, and that it is considering the possibility of an RDR-style review of mortgage products and whether a structural intervention in the mortgage market could lead to benefits for consumers.
The scale of what such an RDR style process, if indeed any recommendations for such a move make it through the consultation process, are unclear. Though the representatives from the FSA who addressed the conference were keen to point out that the regulator was very aware of the differences between the retail investment market and the mortgage sector, they also suggested that many of the themes which are emerging from the RDR may provide relevant pointers for the mortgage sector. This could include, like the RDR, a greater emphasis on qualifications and the achievement of prescribed standards of initial and ongoing learning among those providing advice and selling mortgage products.
How should the sector seek to respond to these changes? Well until the consultation document is published, and the scope of the proposed changes outlined, then there will undoubtedly be considerable speculation about what form they might take, or what burdens they are going to place on advisors. However, it should be remembered that the mortgage industry adjusted admirably to meet the new regulatory examination requirements that came into force in 2004, when the FSA first started to police the mortgage sector. There is no reason to think that it cannot do so again.
The key will arguably be diversification. In a new regulatory environment, and in these tough economic times, it is those brokers who distinguish themselves from their competition, and who place the consumer at the centre of their proposition, who are likely to reap the rewards. Attainment of specialised qualifications is a good way not only to gain expertise and knowledge of new areas, but of demonstrating additional expertise and professionalism to their peers, and vitally, to their customers.
As I have previously highlighted in Mortgage Introducer, the level of engagement with the ifs School of Finance’s additional suite of qualifications other than the industry standard Certificate in Mortgage Advice & Practice (CeMAP) has been very encouraging, even before the FSA began to signal that major changes were in the pipeline. We have already seen thousands of advisers taking our Certificate in Regulated Equity Release (CeRER), our Certificate in Commercial Mortgages (CeCM) and many advisers taking CeFA and moving on to the new level four Diploma for Financial Advisers with a view to expanding their skills to provide holistic financial advice in the post RDR world. These trends look set to continue as, now more than ever, it is up to advisers to demonstrate that they have the skills to meet the challenges presented by difficult market conditions, and whatever regulatory changes are to come, head on.
