I start with news from MM which highlighted comments from John Tiner in front of a House of Lords select committee on regulators. Accused of ‘bending over backwards to defend the industry’, he responded that there is much more of a case to name and shame firms on the results of mystery shopping.
This should be of concern as the Financial Services Authority (FSA) found bad practice on mortgage advice in about two-thirds of cases. On the positive side Tiner stated the FSA could go further to reduce the regulatory burden faced by advisers striking a balance between market confidence and consumer protection.
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More FSA research in MSL suggests that nearly 40 per cent of small firms feel better guidance on fraud rules is required from the regulator.
Fixed rates
There is a lot of coverage of the launch of Nationwide’s 25-year fixed rate deal. Although nothing new and with a limited funding line, this is the first of the mainstream lenders to release this type of deal with past demand from consumers for this length of term being low. It is seen as a way for a first-time buyer to get the foot on the housing ladder with fixed mortgage expenditure and a possible stretched income.
Another criteria in the spotlight this week is ‘age’ in MS. It was revealed last week that a 102 year-old man from Sussex was granted a 25-year buy-to-let mortgage, causing much discussion on whether the current age band of 18-75 years-old on many lender’s criteria should be reviewed.
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Service
Both sides of the service proposition are visited, lenders in MSL, and brokers in MM. On the lender side there are a number of stories that highlight the challenges lenders are facing to get cases processed on time. For brokers, Accord highlighted research that suggests 80 per cent of clients who were offered retention products from the lender did not get any advice from the broker that sold them their original deal on what they should be doing with the new offer.
It’s clear that with firms now in the implementation stage of the ‘Treating Customers Fairly’ regime, service will play an ever-increasing role in meeting the FSA’s expectations. It also throws up the question whether retention proc fees are driving the right behaviours for some brokers in ensuring their customers have the right deal at the end of the initial term of the mortgage.
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The recent Budget has signalled the demise of Pension Term Assurance but the article in MSL highlights a more significant issue – the protection gap, which is now estimated at £2.3 trillion in 2006. Seen as a change in direction since ‘A Day’ by the government, it had given the industry an opportunity to raise the public’s awareness of their protection needs but many now believe this opportunity is lost.
Nick Kirwan of Scottish Widows suggests this sends out the wrong message to the public and affects confidence in the industry going forward. With the publicity around tax raids on pension funds and their impact 10 years on, it’s clear the industry is always going to be a target for generating revenue.
Market sectors
In MM, a new sector of the market has been identified. The super-prime’ customer – clean credit record, very low loan-to-value (LTV), and risk rating – is being targeted by online companies looking to arrange mortgages over the internet. Already the channel of choice for car insurance, it is predicted that the super-prime customer will be arranging their mortgage via the internet in the next couple of years.
Talking of competitiveness, MI identified Kensington’s profit warning as a clear indication of how competitive the non-conforming market is becoming. The age of high pay rates and arrangement fees in this sector seem to be a thing of the past being replaced by innovative criteria and improved risk modelling.
With the number of shortfalls being experienced by lenders after the sale of a reposed property, it’s clear that house prices have lulled people into a false sense of security and the recent cooling housing market means buyers are left vulnerable.
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