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The Mortgage Event

The Mortgage Event. Vision of the Future. Tim Dawson Chairman IMLA. Vision of the Future. Content Regulation e-commerce Niche Lending. Role of FSA. The FSA has four statutory objectives: market confidence: maintaining confidence in the financial system;

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The Mortgage Event

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  1. The Mortgage Event Vision of the Future Tim Dawson Chairman IMLA

  2. Vision of the Future • Content • Regulation • e-commerce • Niche Lending

  3. Role of FSA The FSA has four statutory objectives: • market confidence: maintaining confidence in the financial system; • public awareness: promoting public understanding of the financial system; • consumer protection: securing the appropriate degree of protection for consumers; and • the reduction of financial crime: reducing the extent to which it is possible for a business to be used for a purpose connected with financial crime. With the aim: • To promote efficient, orderly and fair markets and to help retail consumers achieve a fair deal. Source: FSA Website - What we do

  4. Objectives of Mortgage Regulation To enhance consumer protection in two key ways: 1. Improvements to information about mortgages made available to borrowers, achieved through: • rules on financial promotions, designed to create high standards in product transparency • pre and post sale disclosure documents, to enable consumers to acquire clear information specific to their circumstances and in a standard comparable format • provision of comparative information and consumer education to help in the early stages of shopping around, and to raise understanding of mortgage products • measures to improve information provided to those facing arrears and repossession Source: FSA website - Mortgage Regulation

  5. Objectives of Mortgage Regulation (2) 2. Mortgage lenders need to be authorised by the FSA and to meet the following high level standards: • Threshold Conditions set out in the Financial Services and Markets Act (FSMA) • senior management responsibilities • systems and controls Source: FSA website - Mortgage Regulation

  6. Mortgage Regulation Has Mortgage regulation achieved these objectives?

  7. Cost Effective ? • 40% of Intermediaries costs increased by 10% • 21% of Intermediaries costs increased by 20% • Costs to implement MCOB  £200m • MCOB annual running costs £75m - £150m

  8. Better Decision Making ? • 86% IMLA members think KFI not helped or made little difference. • 60% Intermediaries think clients don’t understand KFI • 70% Intermediaries don’t think clients use KFI’s to compare products

  9. Better Decision making ? • 68% of Intermediaries don’t believe clients get better advice post Mortgage Regulation • 72% of Intermediaries don’t believe clients benefit from Mortgage Regulation

  10. Objectives of Mortgage Regulation Improvements to information about mortgages made available to borrowers, achieved through: • Financial promotions ? • Enable consumers to acquire clear information specific to their circumstances and in a standard comparable format ? • Help consumers shop around NO • Improve information provided to those facing arrears and repossession ? • Cost effective NO

  11. MCOB Impact on Market Structure • More DR’s than expected • Few networks disappeared • Shortage of AR’s • No clear sign of market shake out yet

  12. The Future • FSA Plans: • Cost benefit review - 2006 • Review of KFI - 2006 • TCF

  13. The Future • What the market would like: • Review of MCOB • Simplify regulation • Reduce cost • Involve / work with the industry

  14. E - Commerce

  15. E - commerce business levels

  16. Online Growth Average online business: • Now 38% • In one year 47% • In 5 years 80% ?

  17. Niche Lending

  18. Niche Lending - Current Intermediaries think niche lending is: • Extremely / very important 45% • Quite important 35% ____ “Important”80%

  19. Niche Lending - Future Intermediaries think: • Much / a little more important 64% • Less important 3%

  20. Niche lending - Products Current importance of individual markets: • Self Cert 21% • Buy to Let 13% • Sub prime 11% • 100% 6% • Equity Release 6%

  21. Niche Markets - Growth Growth of Individual markets: Equity Release +6% pa Self Cert +5% pa Sub prime +5% pa Buy to Let +3% pa

  22. Niche Lending - Importance

  23. Niche Markets - Conclusion • Equity Release will become a major market • Self Cert will remain important • Buy to Let much less important

  24. Q & A’s End and Thank you

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