How lenders responded to the Mortgage Market Review (MMR)
The latest update to the Mapa Mortgages Dashboard service is now available to subscribers to view. Here are a few highlights.
This quarter, multiple providers were found responding to the new regulations imposed following the Mortgage Market Review, which was undertaken to avoid a repeat of the irresponsible lending that contributed to the housing bubble bursting in 2008. This comprehensive review of the mortgage market is an initiative led by the Financial Conduct Authority, which has enforced new affordability criteria on those applying for mortgages, requiring lenders to provide mortgage advice and stress test potential homebuyers to ensure that consumers do not take out loans they cannot afford.
As part of the implementation of the MMR related rules, all interactive mortgage sales processes, such as face to face or on telephone, will need to be advised from 26th April 2014. Following this both First Direct & Tesco Bank introduced their respective mortgage advice services available by phone. First Direct communicated the pre-launch of the service to its existing customers by including related information within its e-marketing newsletter. On its website, the bank emphasised the use of the telephone channel to apply for a mortgage at multiple locations within their mortgage pages. The text seemed to accentuate receiving advice before applying for a mortgage on the telephone as a benefit over applying for a mortgage independently using the online channel. Tesco Bank on the other hand added a dedicated page on their website giving more information about their new service.
Under the MMR directives, customers who have chosen a mortgage deal and do not require advice can opt for an online application process. As part of this, most of the online mortgage applications available from various providers now require customers to explicitly agree or confirm they no longer want to receive mortgage advice and continue with an execution only mortgage. Other developments related to the online application process involved Coventry Building Society removing all mortgage-related online applications for both new and existing customers and Virgin Money introducing the capability to let customers obtain a Decision in Principle (DIP) on its website. HSBC also added a detailed online mortgage application to their website, with certain noteworthy features such as help icons for most questions, product comparison capability, application tracking and the option to save and return.
On banks’ intermediary websites, multiple providers were found communicating changes made to their intermediary systems and processes as a result of the Mortgage Market Review through banners and links to news articles on the main intermediary homepage. While some have added user guides detailing the changes, others have dedicated sections with help and advice. Of the techniques used by providers to communicate system changes on its intermediary site, Santander stood out the most by adding multiple video tutorials and user guides demonstrating how to input specific details following the refresh of their online application system – Internet Introducer.
The implementation of the Mortgage Market Review and the recent signalling of tighter controls on risky lending in the near future by Bank of England is expected to slow down the overheated mortgage market by exerting pressure on existing banking costs, systems and processes. Measures such as these endorsing responsible lending may involve short term pitfalls and challenges, but will have positive long term implications that will help lenders to benefit from the market boom while keeping their risk exposure and bad debts in check.
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