It’s been an fascinating summer season. While many individuals have been jetting off on their holidays, the Financial Conduct Authority landed a hefty dialogue paper (DP25/2) — Mortgage Rule Review: The way forward for the mortgage market.
At Ami, we’ve spent August dissecting and digesting its contents, working intently with our members to form our response.
This paper units out an formidable agenda: help sustainable homeownership, strengthen accountable lending, future-proof later-life lending, encourage shopper understanding and drive innovation. These are massive themes, every substantial in its personal proper. As we contemplate affordability, product innovation and evolving shopper wants, one factor should not be neglected: the worth of recommendation.
A two-tier recommendation system dangers confusion, poor outcomes and a race to the underside
Some progress has already been made: lenders have reassessed affordability stress checks, and the Bank of England’s modifications to loan-to-income circulation limits have loosened restrictions on higher-LTV lending. But have these modifications had their meant impact but? It feels too early to inform.
And the timing of this paper raises an essential query: are we at risk of transferring too shortly, earlier than the total advantages might be noticed? This is the place advisers play a vital function. They see at first hand how debtors reply to affordability pressures and product modifications. More importantly, they know which options actually work in follow — which is why we’ve held quite a few working teams with advisers to achieve this perception.
Consumer wants
Innovation is wholesome, nevertheless it should replicate shopper wants. A extremely intermediated market offers lenders confidence to check these concepts safely. Brokers act as a vital suggestions filter for lenders, and this demonstrates how innovation and danger urge for food might be balanced responsibly.
But innovation have to be aligned with wider motion on housing coverage. Supporting first-time patrons with out addressing the dearth of inventory will gasoline a provide/demand imbalance, doubtlessly undoing any constructive steps.
These are massive themes, every substantial in its personal proper
The dialogue paper locations robust emphasis on later-life lending, highlighting two major issues: patrons are getting into the market later in life and taking longer phrases that run into retirement; and older debtors will more and more have to entry housing fairness to fund retirement.
Product improvement may type a part of the answer, particularly as we’ve merchandise on the shelf reminiscent of retirement interest-only, which stay under-utilised on account of restrictive standards. Most importantly, collaboration throughout the sector is important, as is bridging the hole between mainstream and fairness launch recommendation. The FCA proposes all advisers maintain an fairness launch qualification, which may help extra holistic recommendation and steerage.
But {qualifications} alone gained’t assure good outcomes; what issues is guaranteeing shoppers have entry to an adviser who can clarify the total vary of choices or present applicable referrals.
The FCA can be contemplating whether or not disclosure necessities, such because the European Standardised Information Sheet, ought to be simplified and even changed. We ought to be aware of the associated fee — financial and time — to develop and implement a substitute.
One disappointing omission is the buyer want for cover. Talking about the way forward for mortgages in isolation feels silly
We would welcome a wider session on disclosure with consideration of streamlining by way of a shopper lens. Let’s be aware of oversimplification because it dangers diminishing the recommendation course of, doubtlessly creating an area for simpler implementation of execution-only fashions, which may result in poor shopper outcomes.
Perhaps most regarding is the paper’s suggestion that advisers typically ship a better customary of recommendation than regulation requires and that this will justify splitting recommendation into ‘customary’ and ‘enhanced’ classes. This is a harmful path. Mortgage selections are inherently complicated, and shoppers want trusted, constant steerage. A two-tier recommendation system dangers confusion, poor outcomes and a race to the underside.
One disappointing omission is the buyer want for cover. Ami’s personal Viewpoint analysis exhibits {that a} home buy stays the highest set off for cover gross sales. Talking about the way forward for mortgages in isolation feels silly.
Innovation is wholesome, nevertheless it should replicate shopper wants
No article nowadays feels full with no point out of synthetic intelligence (AI). The paper raises the query: “What are the dangers of AI-assisted recommendation?” I think most readers know the place Ami stands!
As we draft our response, our precedence is obvious: to make sure the worth of recommendation is embedded as the important thing success consider the way forward for the mortgage sector.
Stephanie Charman is chief government of the Association of Mortgage Intermediaries
This article featured within the September 2025 version of Mortgage Strategy.
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