A lot has certainly happened since the market came under the watchful eye of the FSA, much of it for the better but unfortunately some for the worse.
Indeed, the most recent BBC Panorama report on non-conforming lending saw a number of firms come in for some stick after the sector was painted in a less than favourable light. Aside from issues of bias and arguments over the programme’s line of questioning, it undoubtedly did little to help already cynical borrowers.
There have been marked improvements across the whole mortgage industry however, with Danny Lovey, sole trader at The Mortgage Practitioner, praising the FSA for the clarity and organisational improvements that regulation has brought to mortgage offers.
He did however criticise KFIs, saying ‘they are too long-winded and bulky, and still in need of a lot of surgery.’
“There really ought to be a cover page as there is a huge amount of information to wade through,” he added. “Brokers are supposed to be clear and fair with customers instead of giving misleading information, but the overly specific APRs and legal fees given out in the KFIs can confuse the customer.”
However he applauded the work of the regulator, saying: “The FSA is definitely learning, it has certainly taken time for it to tune into the same wavelength, but it has widely improved the industry.”
The newest addition
Equity release was brought under the FSA mortgage umbrella back in April 2007, but according to Jon King, chief executive of Safe Home Income Plans (SHIP), the trade body and its members already go over and above what the regulatory requirements call for.
However the issue of members is crucial, as not all equity release practitioners are members of SHIP. Just a week ago, the FSA levied a fine against equity release firm, The Minel Group Ltd, for lifetime mortgage failures.
After three years of tighter controls and six months of FSA regulation, this wrap on the knuckles unfortunately went some way towards proving that while equity release might have shaken off its tag as the industry’s ‘black sheep’, the sector is still a bit of a minefield.
Alongside the Panorama programme on non-conforming lending, Tonight with Trevor McDonald looked at the equity release sector.
McDonald targeted shared appreciation mortgages – the equity release product which should undoubtedly shoulder a greater portion of blame for chipping away at consumer faith over the past two decades.
“The shared appreciation mortgages of the early nineties were an absolute scandal and did the market a lot of damage,” reflected Lovey. “However in the years since, people’s confidence has increased immensely – I have every confidence in the sector for the medium to long-term.”
The growing popularity of the sector is continually affirmed both by the swathe of equity release products coming to the market and by the ever-decreasing average age of retirees plumping for the scheme.
King added: “In a funny kind of way, the fact that Sale and Rent Back schemes are dead set on calling themselves equity release schemes shows just how far the sector has come – that they want to jump aboard and get some of the glow for themselves. However it is important to bear in mind that regulation does not make products good.”
The FSA is certainly continuing to put up a valiant fight against bad practices across the industry, however it is now renewing its focus on ‘Treating Customers Fairly’ and with the March and December 2008 deadlines looming, war most definitely marches on.
After coming such a long way, all involved in the mortgage arena are now focusing their efforts to face the current market chaos head on, in one of the most testing of times yet. However it is safe to say that, while we have certainly not seen the last casualties of the ‘credit crunch’, those still standing agree that the mortgage industry has come on leaps and bounds since April 2004.
