Mortgage brokers and advisers have a “hugely important” role to play in helping more Britons on to the housing ladder, the FCA has said.
Speaking on the latest FT Adviser Margin Notes videocast, David Geale, the FCA’s permanent executive director for payments and digital finance, explained the reasons the regulator is looking at the future of mortgage lending in the UK.
Geale also discussed how technology and AI could be used more to help lenders and brokers in their decision-making.
He said: “We see AI developing as a tool, and that can be used in different ways. It can be used to help some people with their selection.
“It can help people in terms learning and help to identify customers who need support.”
But as well as considering how AI and technology can shape the future of the UK’s mortgage market, Geale said even if the adviser used AI to help “streamline” the process, the role of independent advisers would always be vital in delivering personalised and tailored recommendations to would-be homeowners.
Geale praised the work of independent brokers in helping people on to the housing ladder.
He told FT Adviser: “We still think there is a hugely important role for advice, whether that’s face-to-face, over the phone or other ways.”
Reasoning behind the latest discussion paper
He said there were strong reasons behind the FCA’s latest discussion paper, which aims to “open the debate” on how to help more people achieve home ownership.
The latest paper is part of the Mortgage Rule Review, and follows a policy statement in which which the FCA removed the automatic advice requirement for regulated mortgage transactions, where there is interactive dialogue with the firm.
The current discussion paper remains open for responses until September 19th.
We think the support is there for them in a way that it wasn’t before.
He highlighted that “around 99 per cent of mortgages that were taken out since 2014 are actually being paid”, showing lenders are generally being responsible.
Geale explained: “We set the rules that lenders abide by in terms of deciding on their lending approach,” noting that while these rules have been in place since 2014, the market has changed significantly.
Indeed, demand for more flexible mortgage products has been noted by the regulator, with “just under 40 per cent of people looking to buy but struggling to do so”, he said.
Groups facing the most difficulty include first-time buyers, the self-employed, and those with irregular incomes or borrowing later in life.
Geale suggested exploring greater flexibility in affordability tests, such as taking rental history into account, or offering hybrid products such as part interest-only, part repayment loans.
However, he cautioned: “With additional flexibility comes additional risk . . . some people may not be able to afford it, but we think the support is there for them in a way that it wasn’t before.”
Find out more
To watch the full interview, click on the link above.
What are your views? Join the comments below and get your responses into the discussion paper before it closes on September 19.
