The biggest concern in the mortgage market right now is regulation which is constraining credit growth and causing the consumer to suffer from higher cost and less choice, industry experts say.
Fifteen mortgage and financial industry key players taking part in a recent roundtable discussion concluded over-regulation is the most concerning thing the mortgage industry faces.
Lisa Claes, ING
Direct executive director of distribution, said the larger players have the scale to absorb the costs, while the smaller players do not.
“I am proud of the fact that we’ve survived the GFC with the most resilience in the world. But I am not proud of the fact that we are probably the most over-regulated environment in the world. Because it just translates into cost for the customer,” she said.
“There is just this build-up of regulatory plaque. We don’t ever seem to pause to pick-axe it off.”
Instead, more regulation which is not “fit for purpose” is being added on, Claes said.
mortgage head Clive Van Horen agreed. “Although most regulation is ultimately about protecting customers, they also eventually bear much of the cost of regulation.”
Yellow Brick Road CEO Matt Lawler
said the industry must be careful it does not attract the sort of regulation which financial advisers now need to contend with under FOFA changes.
Lawler said there are two concerning trends which are leading the industry to a “FOFA moment”. These are the way mortgage rates are being advertised – “out of control” – and short-term incentives given to brokers to write volumes with a specific lender.
These incentives are a consumer’s “worst nightmare” as they believe they are getting independent advice, when in fact their broker will get a bonus if they push a loan with a certain bank, Lawler said.
However, Mortgage Choice CEO Mike Russell disagreed that regulation is having a negative effect on the industry.
“It’s hard to argue that regulation has stifled credit growth, when this year we are up 17 to 18% year-on-year with new home loan flows. From a consumer point of view they have been rewarded with historically the best mortgage rates we have ever had in this country.”
Other concerns for the industry are that the race for market share is increasing credit risk, the low interest rate is increasing household leverage too quickly, and property prices are in real danger of overheating.
The roundtable was organised by Deloitte Financial Services.