Looking back to the early 2000s, it was positive to see lenders wanting to help borrowers get a foot on the housing ladder and responding customer to demand. However, no one would deny that by 2008 things reached the peak and what had been a positive step for many borrowers had resulted in some inappropriate lending and consequently financial difficulty for others. No one was in any doubt that things needed to change.
Fast forward to April 2014 and the dawn of MMR, which was established to reform and regulate the mortgage market with the ultimate goal of making it more sustainable. Ensuring lenders were being responsible with their offers and borrowers were in a place to buy property and manage the repayments, without overstretching themselves.
In the run up to the introduction of MMR, we knew the market was changing, the industry as a whole was beginning to turn a corner. The government’s pledges and commitment to help first-time buyers had been successful and the market was picking up. But with all the changes and schemes to boost lending, some customers were uncertain about what it meant for them. Coupled with this, there was a lot of pent up enthusiasm from the first-time buyer market following the H2B2 initiative which came into effect in December 2013. Lenders struggled to stem the flow of demand for the scheme and then these customers felt the force of MMR.
The industry and media made a lot of noise around the introduction of MMR; there was a lot of hype as the changes were hotly anticipated by the public and lenders, which ultimately drove people from direct to intermediary channels and brokers. Pre MMR, there was a 50/50 split between intermediary and direct lending. Post April 2014, the landscape has changed and the market is now 65/35 intermediary.
We implemented a lot of the changes outlined in the MMR ahead of April last year. However, one element we didn’t account for was the increased pressure on our service teams. Times to offer hit 22 days (we now have them back down to c.11 days and are determined for them not to reach those dizzy heights again!). Retentions and contract variations came under pressure, becoming advised and taking longer to complete. Along with this, different brokers interpreted the affordability guidelines in a variety of ways.
It was disruptive for the industry, but definitely needed to be done. There are still some hurdles, lending into retirement is more challenging, as is equity release. And there remains some ambiguity around the guidelines and what counts as a ‘committed expense’ and transitional rules being interpreted differently. Along with this, we still face uncertainty over the Mortgage Credit Directive in 2016, which may lead to confusion and uncertainty for consumers, lenders and the industry collectively.
No one wants to go back to a pre-2008 crisis. Post MMR, the mortgage landscape is a much stronger market to maintain and is great for intermediaries. Things have definitely ironed themselves out and it’s been a really good journey for the industry as a whole. Since it was unveiled, MMR has had a significant and positive influence on the market, albeit we still have to resolve the issues around transitional arrangements (existing customers moving/porting) and contract variations. We’re in a good place, but there’s always still more to be done. The brokers and our internal teams need to work together to deliver the best service for customers we possibly can.
Following a slow start to the year, it’s encouraging to see market and economic conditions remain positive. Today, customers are getting great service and value. What is more, mortgages are affordable – there is better online access to lenders’ retention rates, strong buy-to-let and fixed rate products, new build and high LTV offerings and interest only mortgages are still available.
