FCA needs to avoid “micro managing” lenders

13th March 2017

The CML Director General Paul Smee has addressed the FCA’s management of the mortgage market. In a keynote speech at the Scottish annual lunch Smee said “Regulators need a detailed understanding of the mortgage market, but should avoid micro-managing it. ”

The FCA’s mortgage market study has recently resulted in significant levels of data being requested from lenders. “I appreciate why the FCA feel the need to look at how distribution is working and would rather they did it now when things look benign than in five years when they had concluded that things were going wrong. Lenders always knew there would be an onerous request for data, but even we are surprised at how much is being sought. In our view, the FCA is asking for far too much information from lenders, far too quickly. I hope they may reflect and refine this to a slightly more proportionate approach. I also hope that they do not get all granular with their report. Micro-management of markets even in the name of competition doesn’t usually work. Let’s stick to big themes and where there is palpable detriment.”

The speech also highlighted the strong growth in first-time buyers in Scotland over the past few years, but pointed out the need to investigate the mismatch between first-time buyer and home-mover activity:

“Our latest figures show a Scottish market which is down, but only marginally, on last year but where first-time buyer activity has shown a healthy increase. There has been a less healthy decrease in movers. The impression of a flattish market overall, with a buoyant first-time buyer sector, is replicated elsewhere in the UK, especially once you leave the special case which is London. The absence of moving activity is something which should give us all pause for concern. Indeed, CML is going further and has commissioned research to report by mid-year on the reasons why the number of transactions seems to be in secular decline.”

The Help to Buy scheme in Scotland has helped first-time buyers strengthen in the Scottish market, but the industry needs to be alert to potential slow activity after withdrawal:

The Help to Buy banner has proved effective in stimulating new build. We will monitor closely whether the market can cope without the stimulus, but the evolution of the product and gradual tightening of availability in Scotland over time has been an intelligent way forward. Lenders will work constructively with government to make the transition into a post-Help to Buy environment as smooth as possible. Alongside the end of Help to Buy, the exit from the European Union may affect the industry, but the impact on the housing market may be modest:

It is not easy to identify specific impacts on the mortgage market. It is a domestic market. There are not particular activities which will become impossible should we leave the single market. We will be asked whether our propensity to lend to EU nationals is affected by Brexit. I am confident in saying that lenders will treat their customers fairly and will avoid unnecessary dislocation to business.

The CML will be merging with other trade bodies in mid-2017, and the mortgage industry will remain strongly represented throughout the UK. The quality of mortgage representation, data, and voice will not be compromised by the change, and the new product council will offer the same sort of home for all types of mortgage lender which CML does today.

Also speaking at the lunch was chair of CML Scotland, Carol Anderson, who identified increasing housing stock as a top priority if the industry is to meet the aspirations of would-be home-owners “Scotland will need more homes built to continue to fulfill people’s aspirations. It is reassuring to see house building being placed firmly as a priority by Scottish and UK governments. The CML in Scotland will work with government in finding ways to make existing avenues to build more streamlined while also exploring new pathways to house building. We hope the government remains open-minded to all forms of tenure in future housing policies to accommodate different needs and preferences of consumers.”