Borrowers will be able to cash out the home without seeking advice from the broker, saving them “time and money”.
The move could result in up to £100 million in broker fees and is part of a range of measures taken by regulators against mortgage rules, “to support growth by ensuring more people can benefit from the choices in the mortgage market and the security of home ownership”.
The ruling provides a greater door to the implementation of a home loan between the borrower and the lender.
Under the Mortgage Rules, reviewing changes to the borrower will:
This is the “suggested interactive trigger” of the watchdog that sounds “warning bell” in the caretaker agency.
“Many borrowers are expected to continue to benefit from regulated mortgage advice,” the FCA said.
“I hope the lender considers identifying what is suitable for consumers who need advice or other support.”
Agent’s wake-up call
But Sebastian Murphy, director of JLM Mortgage Services Group, retorted: “Borrowers who mention borrowers are able to ‘get advice’ when needed should alert the advisory community.
“Even clearly simple product switches require proper complete review from the intermediary, as things may change since the initial mortgage is obtained.
“If we want to make sure that borrowers get the best product for their needs, then regulators should help guide borrowers to brokers instead of staying away from them.”
Regulators say it wants to increase the use of only sales in the field to reduce borrowing costs.
Exquisite consumers
It also points to a study conducted in 2019 that found that its current rules “limit” complex consumer access “more than expected to execute options.”
Regulators estimate that the scope of changes will be reduced by brokers’ annual fee charges to between £12.7 million.
Consumers are expected to save £21.4 million to £2.8 million a year.
However, lenders welcomed the move and reduced potential losses in broker fees.
Charles Roe, UK financial director, added: “Optional nature [of the FCA’s changes] It means that companies can be consistent with their own risk appetite.
“By reducing regulatory friction and enhancing conversion flexibility, the reform will enable the mortgage sector to continue to support the government’s growth agenda by supporting new and existing mortgage clients.”
Knowledge gap
Paul Broadhead, head of mortgage and housing at the Institute of Architectural Society, added: “These changes will allow clients to talk to lenders during the application process without providing complete advice.
“While this may lead to fewer people receiving advice, the initial impact is expected to be limited to clients who go directly to lenders, rather than those who use mortgage brokers’ services.
“For those who use mortgage brokers, it may be open as usual.”
But, as Connect Mortgages CEO Liz Syms noted: “Of course, the difficulty is that lack of knowledge means that some customers, especially vulnerable, may not know when they should really seek advice.”
The Mortgage Agency Association, which had talks with regulators throughout the early summer, was upset and lost the fight against executing only loans – but added that it had a significant victory.
“Ami is disappointed with the FCA’s decision to remove the consulting interaction triggered, and we believe we still bear the risk of consumer harm and adverse outcomes.
“The FCA’s recognition of the value of recommendations and its expectations are encouraged by many consumers to continue to seek support from intermediaries.
Chaman added: “Active elections [of borrowers to actively choose an execution-only loan] – The FCA proposes to remove – still exists to help consumers better understand the losses of only the journey performed and related protections, as well as the requirements for lender employees to hold Level 3 eligibility.
“It is worth noting that the FCA has clarified that under consumption obligations, lenders must ensure that only the routes executed do not cause predictable harm – including the word “cause” is key, which is an important point for AMI lobbying.”
“Although the trajectory continues, AMI hopes lenders maintain strong support for the intermediate channels.”
Save time and money
“In recent years, consumer demand has changed and our rules have changed,” said Emad Aladhal, head of retail banking at FCA.
“Today’s change supports growth by simplifying some of our rules, saving consumers time and money while ensuring they still benefit from advice when needed.
Aladhal added: “We hope lenders use these changes to innovate and better serve aspiring homeowners and existing borrowers.
“These reforms are another important step in our mortgage rules review and we are doing it quickly.”
Regulators will propose proposals for a second broader mortgage review for the fall summer.
