A new consumer duty could lead to lower mortgage affordability, says Britain’s finance chief

A new consumer duty on finance firms could make lenders wary and fewer people able to access mortgages, the chief executive of trade association UK Finance told an industry meeting.

David Postings told the UK financial body’s annual mortgage lunch in London that the move was a “well-intentioned idea”.

He said: “We have to think about applying a new consumer duty.”

The mandate, overseen by the Financial Conduct Authority (FCA), sets clearer and higher standards for consumer protection in financial services, requiring firms to put consumers at the heart of what they do.

The rules take effect on July 31 for new and existing products or services open for sale or renewal, and on July 31 of the following year for closed products or services.

The term “good” is not defined and may be in the eye of the beholder at some point. For a product like a mortgage, this can happen at any point in its life

David Postings, UK Finance

Mr Postings said: “Who can argue that lenders should not have a duty to secure the best outcome for their clients?

“Recently I discussed this matter with senior members of the religious authority and I said that the term ‘good’ is not defined and that it may come to the attention of the seers at some point. For a product like a mortgage, this can happen at any point in its life.

“For example, would you choose a fixed or variable rate today? Which one gives the best results?

“The fixed rate adopted last September can be seen as a prudential hedge against a rising rate environment; six months later, he appears less cautious.

“If you lose your job and move into interest-only or extend the term, does it work out better if you pay more over the life of your mortgage? Who decides?

“In the absence of clarity, lenders may become more cautious.

“This will certainly lead to fewer people having access to mortgage products and this will affect people’s sense of security and ability to own their own home or improve the home they have.

“I think the most important thing is the sense of retrospection. People make decisions based on existing rules and regulations. Increasingly, we’re going to see these rules change.”

Mr Postings also said it was necessary to be vigilant about changing housing stock to meet environmental targets.

He said: “I am concerned that the easy policy option – to encourage lenders to go green at the rate of greening balance sheets rather than housing stock – may be optically difficult to counter.

“This approach could have the unintended consequence of creating non-liable energy-efficient properties or punishing homeowners who cannot easily make the change through higher interest rates or local environmental taxes.

“Both lead to the creation of a new class of property prisoners; As a lender, that’s something you don’t want to be.

“So we need to be vigilant and emphasize the need to provide incentives that promote a sense of safety and inclusion. The alternative undermines people’s confidence in housing.”

Consumer responsibility requires firms to create useful products, sell them honestly, set fair prices, and provide decent customer service.

FCA representative

Tighter mortgage lending regulations were put in place after the 2008 financial crisis to make sure lenders offered affordable loans.

The FCA has undertaken a range of activities to help firms prepare for the new consumer duty, including the production of guidance, roundtable sessions and podcasts.

At a UK Finance dinner last year, FCA chief executive Nikhil Rathi said: “The (consumer) duty places a duty on firms to act to deliver good outcomes for consumers: to act in good faith, to avoid foreseeable harm and to support consumers. their financial goals.

“We know that consumption tax does not guarantee good results. This leads firms to consider what it looks like and make an honest decision.

“Firms must also provide information that customers understand, guide customers to products, services and after-sales support that meet their needs and offer fair value. These principles are not controversial.”

An FCA spokesman said on Friday: “Consumer duty requires firms to make good products, sell them honestly, charge fair prices and provide decent customer service.”

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