Consumer duty, recession and technology discussed on this week’s Lenders Live

By Becky Bellamy 1^st August 2022 3:16 pm

While lenders and brokers were happy with the input they had in the final consumer duty rules, they believe that a lot of the information in the 300-page document already exists but in different formats.

Last week the Financial Conduct Authority (FCA) published its long-awaited new consumer duty rules, extending its deadline for implementation from 30 April 2023 to 31 July 2023.

The Association of Mortgage Intermediaries (Ami) said that, with the FCA expecting implementation plans on the new consumer duty rules by the end of October 2022, firms should “start work on this now.”

Speaking on the latest Lenders Live panel on LinkedIn, Pepper Money UK sales director Paul Adams said: “I don’t think [consumer duty] will be a wholesale change to everything we’re doing but it will all come at a cost and there’s a debate whether the work that lenders and brokers needed to put into this and the cost associated with it, will match the benefits.”

However, Adams highlighted: “We’re all behind anything that improves customer outcomes and fairness for customers and at the same time does not reduce the competitiveness of the market.”

“What we don’t want to see is unintended consequences as a result of consumer duty, but the Financial Conduct Authority are good at retrospectively looking back to make sure that they do post-implementation reviews. I’m sure they will step in if it fundamentally changes the landscape of the UK mortgage and housing market.”

“We need to be supportive of this because it’s all about customers getting the right advice, getting on the information they need and making the right choices for themselves,” Adams adds. 

Recession and the mortgage market 

With the news of US lenders First Guarantee and Sprout going bust, resulting in hundreds of job losses overnight, the panel discussed the implications of this and how they think the next 12 to 18 months will pan out for the UK as the cost of living crisis and inflation among other things continue.

Glenhawk sales director Jamie Pritchard suggested that since the last financial crisis in 2008 there has been a lot more regulation for the UK mortgage market compared to the US. 

Pritchard said: “Probably the next year and a bit there may be a bit of pain. But we’ve still got supply and demand as there are not enough properties and the 300,000 target of new homes from the government is not being hit. There is also going to be the relaxing of the affordability and stresses, while valuations have been inflated, especially because of the stamp duty holidays last year.”

“I don’t think a cooling of property prices and even levelling out of them should just be seen as a crisis on its own. But I think the cost of living will play a part in the next year onwards. I don’t think we know anything about the cost of living until the heating goes on and how that’s really going to affect people moving forward,” he added. 

Also weighing in eConyenacer director of sales Karen Rodrigues suggested that the industry could see some consolidation between high street banks. 

“We have already seen this with Barclays and Kensington merging, or others working together and there could be more of this. We have already seen some lenders in regards to their securitisation models who have a little bit of struggle in terms of getting those models away and getting the price they were looking for.”

“The UK mortgage market is here to stay, it’s not going anywhere. Since the last financial crisis, we have changed our models and the regulation has kicked in to support outcomes for customers. But I think we will see the consolidation of lending partners going forward,” Rodrigues adds.

Technology and Gen Z

While there has already been a revolution in the way technology has impacted the mortgage industry, the panel discuss how far this could go when it comes to Generation Z. 

Intra Private Finance principal and managing director Bulent Kandemir said: “A lot of youngsters now don’t want to meet face-to-face and they want a system that takes them all the way through.”

“We do need a lot of lenders to get a bit more involved in getting this set up properly so that the younger generation. We do need help in terms of a more open book and having access to systems. While big brokers have access to application programming interfaces (API) but in reality, we need to get lenders more on board and there needs to be more encouragement from the regulators,” Kandemir adds. 

While the younger generations are keen to interact with technology and smartphones, Nick Brown Mortgages owner Nick Brown revealed that most of the time first-time buyers take up the opportunity for a face-to-face meeting. 

“Most times they welcome the opportunity because they have been turned down by a high street lender or they haven’t been able to apply online,” he adds. 

Also commenting, Rodrigues said: “If you were to design the mortgage market and the house buying process, you sure as hell wouldn’t have the conveyancing at the end of the journey, which is part of the big problem.”

“I sit on a home buying and selling group, which is very much about the consumer and one of the things we’re looking at is how we can all work together to pull that information and get as much information as we possibly can when somebody puts their house on the market so that when people are aware when they put down an offer that there are only 67 years left on the lease, for example.”

“There is an awful lot as an industry we can do. I would say that conveyancing is at the beginning of that journey, which is where the mortgage industry was probably a few years ago. We have now got some champions across the industry who are trying to work together to bring forward as much data as we possibly can earlier into the transaction to speed that process up,” she adds. 

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