What does 2019 hold for the mortgage market?

Brexit

2019 I hope has begun for you in busy fashion. Certainly, talking to our AR firms at our recent annual Conference, there was a considerable degree of positivity about what the year might hold, albeit understandably tempered by what Brexit would mean, not just for the UK housing and mortgage market, but the whole economy.

For what it’s worth, and I’m aware that these things can change in a split second, it still seems to be most likely that someone will blink first, and we will get a deal – probably of the softer variety – before March 29th. How far before that deadline is however up for debate – I wouldn’t be surprised if it goes right down to the wire as the sheer destructiveness of a ‘no deal option’ becomes more and more unpalatable.

In our market space, the all-encompassing political debate currently masks what is going on in the mortgage market, unless it’s being debated just how much house prices will fall due to Brexit. But it’s an unfortunate truth that our sector is a political football, and that when you add in the regulatory oversight, the waters ahead do seem choppy, albeit if we do get some certainty I believe confidence will return quickly.

The big question is however, how much more change will we as a mortgage industry have to take on board, especially advisers when we’re currently dealing with an environment where many clients and specifically purchasers/sellers are uncertain about what the future will bring. Would it be too much to hope for something resembling the status quo to be maintained? Probably.

Take, for instance, the Mortgages Market Study of which the final report is due to be published by the FCA before the end of this quarter. Do we doubt there will be some significant regulatory changes contained within this that will alter our marketplace? It would be unprecedented for such a major study not to at result in rule, and therefore, market changes.

The Interim Report talked about giving borrowers more certainty about which products they might be eligible for so will the final document seek to beef up the provision of such certainty. How might it do that? Will the definition of advice be changed? There have been whisperings about this, specifically in relation to execution-only and what might or might not be allowed.

Also, the much-talked about Broker Directory – will it make it past the initial briefing stage, will it include any sort of quality data, or will it merely be a listing of advisers, of which there are a number already in existence? We’re all acutely aware of the difficulties in getting any sort of tangible comparison between firms, but has the FCA been convinced by those arguments.

Now the timescale for any changes is still unknown and we can expect response time to the final report, plus any consultations and rule changes, but one thing is certain – the status quo is unlikely to be maintained.

And again this presents potential difficulties, especially when it comes to firms having to put in place new processes at the same time as we have market uncertainty and other requirements such as the Senior Managers & Certification Regime to implement. If that Mortgages Market Study does contain even a few high-level, but significant changes for the advice sector, part of me can’t help but think its timing couldn’t be any worse.

Of course, I’m putting the proverbial cart before the horse at the moment and await that report with interest. Let’s hope that the oft-quoted, initial findings of that study – namely that the mortgage market works very well for the vast majority of borrowers – remains at the heart of the regulator’s thinking and intervention is kept to a minimum.

Richard Adams is Managing Director of Stonebridge Group

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