FR: You recently launched a mortgage range aimed at borrowers who have retired and are in receipt of pension income. Do you think lenders’ attitudes to later life borrowing are changing and what more can be done?
Yes, we have recently launched two new products aimed at customers who are in retirement and in receipt of guaranteed pension income. We realised that there was a generation of borrowers who may have a need for a mortgage and were being ignored. The product is not positioned as a lifetime mortgage, but is designed for customers who have come to the end of, or want to extend, their residential mortgage but do not want to consider equity release.
Linda Woodall from the FCA delivered a speech in early 2015 where she addressed the issue of lending to an aging population. In the speech it was confirmed that the new rules imposed by MMR was not to make it difficult or to discourage an older borrower from finding a mortgage. Affordability is the key, whatever the age of the borrower. I do believe that more lenders will look to this market and after careful evaluation and consideration of the rules realise that they can help these borrowers.
FR: Why do you think MMR was such a pivotal moment for the mortgage intermediary community and how do you think further regulation will effect the industry?
MMR was the first significant review of the mortgage market since MCOB in 2004.
MMR brought about a number of changes that affected both lenders and brokers. Firstly, the removal of the non-advised sales process has resulted in more lenders re-entering the intermediary market in a bid to maintain their lending volumes. This is in response to the increased time and cost in delivering the advised service. We have also seen new entrants into the mortgage market, with more competition comes more competitive product pricing and innovation in product development.
Secondly, changes to affordability had an impact as customers found it more difficult to obtain a mortgage. At the Marsden we introduced affordability back in 2004 so the affordability changes brought about by MMR did not come as a surprise or a challenge. We did see an impact around customer understanding as lenders developed their own affordability model customers were unsure how the changes would affect their chances of obtaining a mortgage, leading to an increase in referrals to mortgage intermediaries.
FR: What changes do you envisage following implementation of the EU Mortgage Credit Directive?
The EU mortgage credit directive comes into force on 21 March 2016 which will see second charge lending which is currently regulated as part of the consumer credit regime transferred fully to the FCA, this should make the regulatory landscape simpler for those brokers who are engaged in both first and second charge lending. There are also changes in respect of Buy to Let Lending; where the Buy to let is to a consumer and not a business this will also become regulated by the FCA, although we expect this to have a low impact on brokers.
I think initially the problem brokers will be faced with when dealing with their customers is the potential mis-match of information that will be presented under revised disclosure requirements. We understand that a number of search engines will be moving to the new Europeon Standard Information Sheet (ESIS) from the 21 March 2016, whilst lenders are working hard to move their platforms to the ESIS there will undoubtedly be a period of time where the customer is issued with an ESIS by their broker and a KFI Plus Offer by the lender which will look very different and could be very confusing to the customer!
FR: What benefits do both brokers and customers see from choosing smaller lenders such as Marsden Building Society?
Smaller building societies like the Marsden are able to offer a bespoke service to brokers and customers to ensure the service we offer meet their needs.
Importantly we do not take a computer says no approach to lending that some of the larger lenders are forced to adopt when dealing with larger volumes of applications, where any applications that do not “fit” are automatically declined.
At the Marsden we think it is important that every case is looked at by an individual who can apply a common sense lending decision and more importantly brokers and customers can speak directly to decision makers to discuss a case that may be a little bit unusual.
When a customer or broker places an application with the Marsden they will be assigned their own packager who will deal with them right the way through the process, keeping them up to date at key stages in the application process until the offer of loan has been issued.
FR: With the MPC pushing back the timeline on an interest rate rise, how do you think this will affect the rates seen in the market?
The UK economy is in a better place now than it has been over the last 5 years, however we are by no means out of the woods yet. The timing of rate rises will be subject to considerable speculation with expectations spiking in response to economic data or comment by MPC members and then falling back when contrary data appears and comment is clarified. This volatility will feed through to swap costs.
In terms of rates in the market this will mean the costs of fixed rate loans will transiently spike and then ease back but within a fairly narrow range by historical standards. The impact on 5 year Fixed Rates is likely to be more volatile than 2 year Fixed at this point in the cycle.
The likely path of rate increases is forecast as gradual with a peak at lower levels than those experienced prior to 2009. Taking this into account and considering the headwinds facing the UK economy from the global economic environment variable rate products remain worthy of consideration as a realistic alternative to fixed.
FR: If you weren’t in financial services, what would you do?
That’s a tough question; I have always had an interest in horticulture so I would probably say I would be pottering around in a garden somewhere… unless it’s raining! An opportunity to give Alan Titchmarsh a run for his money!
