The Association of Mortgage Intermediaries (AMI) has responded to the FCA’s mortgage rules review consultation and warned that good advice is crucial for the proposals to work well for consumers.
Financial Supervision Authority consultations, Supporting first-time buyers and underserved customers (CP26/18), suggests ways to increase access to mortgages for first-time buyers and underserved consumers.
AMI said it describes the proposals as targeted and proportionate and not a return to pre-crisis practices.
AMI believes there is scope to rebalance lenders’ willingness to take risks responsibly, expand homeownership opportunities and open the door to creditworthy consumers currently blocked by current rules, while maintaining the basic regulatory framework.
In terms of repayment structures, AMI welcomes the FCA’s clear statement that interest-only is only suitable for certain groups of customers with reliable repayment strategies, but highlights part and part as the most balanced and sustainable option for many consumers, reducing long-term risks while maintaining flexibility.
AMI does not believe that the FCA’s proposals can be implemented effectively without advice. The main focus of its response is the role of advice in helping consumers understand their choices, make informed decisions and ensure proposals work effectively in practice.
The trade body has also identified several areas that need clarity before the proposals can be implemented with confidence:
- Designed interactive dialogue requires definition. The term previously had a specific regulatory meaning before being removed last year and reintroduced without definition, creating liability risks for advisers and lenders, and confusion for consumers about whether they are receiving advice.
- Point-of-sale credibility assessments of subsequent payment strategies These should be clearly written in the final rules, so that advisors are not subject to retroactive challenge in the future.
- Keep payment strategies under review. Consumers need the right prompts and support to review their payment strategy at crucial moments, especially when the fixed rate period expires. While lenders have a role to play through timely communications, advice can provide an important opportunity for review and constructive challenge. AMI recommended lenders advise consumers when executing transfers of interest-only products, which helps support informed decisions and good outcomes for the consumer.
- Non-monthly payment structures need a fuller cost-benefit analysis And a broader sectoral discussion, since credit reference reports are based on monthly cycles.
AMI also broadly welcomes proposals for retirement benefits only, borrowers with poor credit, foreign currency loans, and structured bridging.
Stephanie Charman, chief executive of AMI, said: “We share the FCA’s ambition and are working with the regulator, consulting with our trade body counterparts and seeking insight from our members to guide our response to these proposals, many of which we consider sensible and proportionate to creditworthy consumers who are inadvertently excluded by current rules.
“But these proposals will only succeed if lenders and advisers adopt and implement them, otherwise they will fail in their aim of improving market access for more first-time buyers. It is important that the FCA addresses the areas highlighted by AMI through the final rules and guidance, to ensure that firms have the clarity and confidence needed to adopt the proposals effectively.”
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