Mortgage solutions providers are set to see a boom in the coming months, with a host of big names and even the likes of the likes to be joining forces in the industry.
The Financial Times reported that the Financial Action Task Force, the UK’s financial regulator, is to release a new set of guidelines aimed at helping lenders work with new mortgage partners.
In a nutshell, the FASF wants banks to provide a wider range of mortgage solutions to help them work with existing and new mortgage lenders.
The new guidelines include a range of new features, including:• The FASFs guidance states that banks should aim to work with a wide range of potential mortgage lenders, rather than targeting only the most profitable borrowers• There is a new section for lenders to be more transparent with the data they hold about borrowers• The guidance also states that the FAST system, which will help lenders set up the most efficient loan terms possible, will be available to all new mortgage providers.
The FASf also recommends that banks work closely with their existing mortgage providers to make sure they are complying with the law.
“There is no single best approach, but banks need to work together and ensure they are compliant with the Fasf’s guidance and their customers’ needs,” said Matthew Brown, the Financial Conduct Authority’s Director of Consumer and Business Affairs.
“We want to see banks supporting a range on lending to help the financial system work more efficiently, and that includes new mortgage solutions, as well as more traditional ones that help customers in areas such as home ownership and rental affordability.”
For example, banks could be offering more mortgage loan products for those who have a mortgage-related disability, or those with high debt loads, or people with limited credit histories, Brown said.
“But if we can work with lenders to provide more options for borrowers, and to work collaboratively with existing mortgage lenders to offer that choice, that is where we should focus our attention,” he said.
The guidelines will be released at a time when mortgage lending is booming, with the average number of new loans issued per borrower expected to jump to around 3.6 per cent in 2018.
In the first quarter of 2017, the average new loan was £12,000, compared with £11,000 for the same quarter in 2016.
But despite the growth in demand for new mortgage loans, lenders are struggling to keep pace with the growth of demand for mortgages, according to the FT.
Last year, the total number of loans issued was down from 6.3 million to 5.6 million.
This year, lenders have been hit by a number of factors, including rising interest rates, rising mortgage rates and rising competition from the private rental market.
As a result, the number of mortgages issued is expected to fall in the first half of 2018, to 4.9 million, the FT reported.
The FT added that the guidance could be good news for those with credit histories that are high and who have less equity, because it would mean lenders can better ensure their loan offers are tailored to suit borrowers who might have difficulty getting into the market, for example.
“This guidance can help to ease some of the financial pressures facing borrowers and help them achieve better value for money, and will make sure lenders can offer the best terms to customers that can afford them,” Brown said, adding that it would be good to see the FAs guidance published this week.
“With the number and pace of loan applications coming through, it is important that we see this guidance as part of a wider package of measures to improve financial support for borrowers and reduce the risk of defaults on loans,” he added.