AMI calls for BoE action on Brexit and consumer credit affordability tests

AMI calls for BoE action on Brexit and consumer credit affordability tests
Monetary Policy Committee runs the risk of becoming limited in calling the right actions needed today to allow the British economy to support itself over the coming years.

The Association of Mortgage Intermediaries believes the Bank of England "has a duty to take a position on Brexit" but expects a rate rise to come in February rather than November.

In its latest Quarterly Economic Bulletin for Q3, the AMI says the Bank's Monetary Policy Committee runs the risk of becoming "limited in calling the right actions needed today to allow the British economy to support itself over the coming years".

It also raised concerns over increasing consumer credit lending. The AMI is now calling for affordability assessments on secured debt, which became mandatory under MMR, to be extended to the consumer credit sector.


The AMI notes that the Bank of England has already warned credit card, personal loan and car finance firms against "sloppy or lax affordability underwriting".

It says the 40% of consumer credit applicants which are being approved for prime customer rates is "too high", stressing that interest rates on a £10,000 personal loan are close to record lows and the average interest-free period on credit card balance transfers has doubled since 2011.

Although unsecured credit availability tightened modestly in Q2 and was expected to tighten further in Q3, "the level of competition between lenders remains strong", the AMI said.

It also warned that a number of factors exist this year that "could dampen any potential uptick in gross mortgage lending", noting a "reasonable rationale of depressed activity" in the housing market.

The Bulletin said "mortgage lending is relatively flat, house price inflation is pretty flat, transaction volumes are flat and the view from the Bank of England in its latest Inflation Report - flat".

The AMI continued: "Lending has undoubtedly been subdued so far this year, with first-time buyer and remortgage activity driving volumes. Second hand purchase has fallen off a cliff. Homemovers are notably down, with this key section of the market visibly constricted by supply. Whether this is a result of punitive stamp duty costs as many commentators suggest, or the lack of available and appropriate stock on the market is up for debate.

"Intermediaries are nevertheless reasonably well positioned to weather any potential storm. Brokers have improved remortgage penetration considerably over the past few years and fierce product competition between lenders continues to drive enquiries."

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