The Association of Mortgage Intermediaries (AMI) has responded to a consultation on the FCA’s Mortgage Rule Review and warned that good advice is essential to effective offers for consumers.
FCA Consulting, Supporting First Time Buyers and Less Active Customers (CP26/18), suggests ways to increase access to credit for first-time buyers and underserved buyers.
AMI said it described the proposals as targeted and limited rather than a return to pre-crisis practices.
AMI believes there is room to rebalance the risk appetite of lenders in a responsible manner, expand home ownership opportunities and open the door to creditworthy buyers who are currently locked out by existing regulations, while maintaining the basic regulatory framework.
On payment structures, AMI accepts the FCA’s clear statement that interest-only is suitable for certain groups of customers with reliable repayment strategies, but highlights part-by-part as a balanced and sustainable approach for many consumers, reducing long-term risk while maintaining flexibility.
AMI does not believe that the FCA’s proposals can be effectively implemented without advice. A key focus of its response is the role of advice in helping consumers understand their options, make informed decisions and ensure that proposals are effective in practice.
The trade body has also identified several areas where clarification is needed before the proposals can be implemented with confidence:
- A conversation that is meant to work requires definition. The term previously carried a specific regulatory definition before its removal last year and reintroducing it without definition creates credit risk for advisers and lenders, as well as confusion for consumers about whether they are getting the right advice.
- Assessing the credibility of point of sale payment tracking strategies it should be written clearly in the final rules, so that the advisers are not exposed to a future challenge.
- Keep payment strategies updated. Consumers need the right information and support to review their payment strategy at key times, especially when the fixed rate period ends. Although lenders have a role in timely communication, advice can provide an important opportunity for revision and constructive challenge. AMI recommended that consumer signposts provide advice when making product referrals of interest only, to help support informed decisions and positive consumer outcomes.
- Non-monthly payment structures require a full cost benefit analysis and industry-wide discussion, given that credit reference reporting is structured in monthly cycles.
AMI also widely accepts interest-only proposals for retirement, credit-impaired borrowers, foreign currency loans and bridging loans.
AMI chief executive, Stephanie Charman, said: “We share the FCA’s ambition and have been working with the regulator, liaising with our trade association partners and seeking understanding from our members to inform our response to these proposals, many of which we believe are sensible and fair to consumers who are eligible for credit that the current rules inadvertently exclude.
“But these proposals will only work if lenders and advisers take them up and implement them, otherwise they will fail in their aim to improve market access for more first-time buyers. It is important that the areas highlighted by AMI are addressed by the FCA through final rules and regulations, to ensure that firms have the clarity and confidence needed to successfully adopt the proposals.”
