The Intermediary Mortgage Lenders Association (IMLA) has published its response to the Financial Conduct Authority’s consultation CP 26/18, Mortgage Rule Review: Supporting First-Time Buyers and Under-served Consumers, welcoming the regulator’s direction of travel while highlighting areas which call for caution or further consultation.
The association particularly welcomes the fact that many of the proposals are permissive rather than mandatory, leaving individual lenders free to decide whether to adopt new practices in line with their risk appetite, operational capacity and commercial judgement, while continuing to protect borrowers from over-stretching themselves.
On interest-only lending, IMLA agrees such loans can help first-time buyers stretch affordability and secure a purchase that might otherwise be out of reach, while welcoming the FCA’s confirmation that interest-only will not be made universally accessible. It also cautions against borrowers remaining on interest-only terms for extended periods without building equity in their homes, and suggests that lenders may decide they need to review the credibility of repayment strategies more frequently than the single review currently mandated.
IMLA also urges caution on proposals to accommodate mortgage payments made at irregular intervals, warning that changes could have significant knock-on effects for the definition of arrears and for borrowers’ credit records unless applied consistently across the industry. It believes this issue requires further consultation with all relevant parties including, in particular, the credit reference agencies.
Kate Davies, executive director of IMLA, said:
“The FCA is asking the right question: are our mortgage rules more restrictive than they need to be? Recent relaxations have been sensible, and there is scope to go further, but nobody, least of all lenders, wants to return to the days of over-exuberant borrowing and lending. Our message to borrowers, particularly first-time buyers weighing up options such as interest-only, is simple: speak to a mortgage adviser. Many people assume they cannot get a mortgage when in reality they may be closer than they think.
“It is also important to be realistic about what regulation can achieve on its own. For decades the UK has failed to build enough homes, and no amount of product innovation can compensate for that. We would strongly support a well-designed successor to Help to Buy – one which increases the supply of smaller homes for first-time buyers and downsizers, avoids inflating house prices, and extends to second-hand properties as well as new-build –alongside a detailed review of Stamp Duty to encourage downsizing and get a sluggish market moving again.”
For further information please contact:
Paula John, Paula John Communications
Tel: +44 (0)7973 435 299
Email: paula.john@imla.org.uk
Notes to Editors
About IMLA
The Intermediary Mortgage Lenders Association (IMLA) is the trade association that represents mortgage lenders who lend to UK consumers and businesses via the broker channel, and associate providers. Its membership of more than 50 banks, building societies and specialist lenders includes 18 of the 20 largest UK mortgage lenders (measured by gross lending) and accounts for over 90% of mortgage lending.