Alan Dring reflects on half a year of mortgage regulation and gives his thoughts on what the next six months may bring
It is hard to imagine that just over six months ago mortgage regulation did not exist. In the run-up to ‘Mortgage Day’ there was trepi-dation for many as project teams were devoted to ensuring that it passed off without a hitch.
Those hitches materialised for some and regulation forced many to re-evaluate their core propositions and business models. The fact that mortgage regulation has forced the industry to look more closely at how it serves customers and the way in which we run our businesses is surely a positive.
There has been much debate about the consequences of mortgage regulation but what has been the real impact?
Standard Life Bank recently commissioned syndicated research with Charterhouse Research Ltd to investigate how intermediaries were feeling post-‘Mortgage Day’.
Some key findings were that the introduction of KFIs has had a negative impact on the sales process; some lenders and sourcing systems were unprepared; and product innovation over the past six months has been stifled.
There is no doubt that mortgage regulation has been tough for this industry as lenders, customers and brokers have had to get used to new processes and expectations.
However, regulation has provided an ideal opportunity for both lenders and advisers to review business models and has also highlighted the need for both parties to work in partnership.
Consumer benefit
The impact of mortgage regulation on consumers is difficult to measure but many intermediaries report that the sales process has become lengthier. Hopefully its success will be seen in the absence of consumer complaints and media allegations of mis-selling in the years ahead.
I suspect now the first level of dust has settled, groups such as the media may use customer surveys to discover if a regulated environment has indeed made our industry more transparent.
Going forward, the government and the regulator may be preparing for other areas such as buy-to-let to become regulated. Lenders, trade bodies and introducers should all use mortgage regulation as an opportunity to ensure we form stronger partnerships that will result in a stronger industry.
The FSA’s round of compliance visits are likely to provoke debate as will its proposed assessment of KFIs, which should hopefully become slicker and more customer-focused. Service will continue to be a key differentiator for players as pressure on margins increases.
Charterhouse Research Ltd’s study also uncovered that understanding FSA requirements and interpreting rules is perceived as one of the biggest challenges for directly authorised intermediaries and that compliance visits in April 2005 were viewed with trepidation by some.
Partnerships are vital
Lenders must work closer with brokers to ensure they are adequately equipped for continuing industry change. Stronger lender-broker relationships are key in a market undergoing intense change and lenders have a responsibility to play a more active role in ensuring brokers have the potential to respond to changing market pressure and the new regulated environment as they strive to grow their businesses.
Just as vital however is the need for networks, clubs and other industry bodies to be aware that it is really key to be working in partnership (not to individual agendas) so that the real benefits of a regulated environment will be appreciated by all providers, intermediary bodies and their members, advisers, the FSA…and perhaps more importantly, the consumers.
We should be proud that the industry has coped as well as it has done post-‘Mortgage Day’. The worst may be over – now it’s time to use mortgage regulation to our advantage and create stronger relationships and a more respected industry.
Charterhouse Research Ltd conducted syndicated research for Standard Life Bank in March 2005. Phase one focused on initial qualitative research among a range of intermediaries comprising 30 in-depth interviews and two focus groups.
Alan Dring is head of sales at Standard Life Bank
