25 February 2014
As a third party provider to the mortgage sector, how well prepared do you think the industry is for the Mortgage Market Review?
Reasonably well prepared, but it naturally varies from one organisation to the next. Lenders must be aware of the operational and reputational risk that they run if they are not ready for MMR, and it goes without saying that they are running out of time to put things right.
There will be pressure on capacity and resource management – staff and skills are finite – and we are already seeing an increase in enquiries from lenders looking for help with both pre- and post-completion servicing, after MMR has arrived.
What is the worst case scenario three months after MMR has arrived?
The worst-case scenario would be if consumers are not aware of changes and find it hard to come to terms with the amount of advice that we are now required to give. Financial professionals in particular may not be happy at the idea of going through a lengthy advice process if firms do not offer execution only for them. The industry will be caught between trying to give customers what they want, and meeting new regulations.
What tips would you give to anyone concerned about MMR?
The way MMR is structured makes it appear to be a simple change but it’s when you delve into it that matters become more complicated.
Our broad recommendation would be to aim to keep things simple. Just stick to giving people advice in the first instance. Play it safe, and if you’re still in doubt, perhaps consider bringing in contractors to help.
Will more lenders turn to outsourcing?
We believe outsourcing will have an increasingly important role. While nobody really knows exactly how MMR is going to pan out, some elements are clear. If you look at the RDR, it created a spike in the amount of reporting that is required, and I know MMR will follow this pattern. Likewise, as with any new regulations, there will be increased scrutiny on who is managing to be compliant.
There will be increased pressure on volume management and a need to ‘ramp up’ a workforce, particularly if people have significant products coming to an end. For example, a batch of five-year fixed-rate products might be maturing at a certain time and there will be a need to meet the spike in activity which will create a demand for outsourced services.
How do you see the market pan out over the next 12 months?
There will be a lot more phone advice. This has been a dying artform, but will have to change. Also, skills are going to be at a real premium in the industry, so we’ll see IFAs who perhaps were offering mortgage advice six years ago, spotting a gap in the market and making moves to look at mortgages once more.