ON the back of new rules governing mortgage lending, Swansea Building Society has commented on the impact of the new guidelines on the market and what it has done to adapt to the new environment.
On April 26, 2014, the Financial Conduct Authority launched its Mortgage Market Review (MMR) – a new set of rules governing the mortgage market designed to ensure it is sustainable and only borrowers who can afford to repay a mortgage get one.
Despite suggestions the more onerous rules might dampen the market in the short term, Swansea Building Society has actually seen an increase in applications in the first six months of 2014.
To manage this against a backdrop of the more stringent rules, the building society has made a significant investment by training its entire mortgage staff as fully qualified mortgage advisors. This has meant anyone within the department can advise customers, cutting waiting times.
More recently, despite the MMR rules being just two months old, the Financial Policy Committee (FPC) has intervened issuing further recommendations around borrowing.
It has recommended that loan-to-income ratios for residential mortgages be restricted to a multiple of no more than 4.5. It also recommended that mortgage lenders apply an interest rate stress test. Over the first five years of a mortgage, borrowers will be assessed to make sure they can afford to repay the mortgage if interest rates rise by 3%.
These new rules come into force on October 1, 2014 but the Bank of England expects all mortgage lenders to operate within the spirit of the guidelines until then.
Alun Williams, chief executive of Swansea Building Society, said: "As a prudent mortgage lender, we have been operating within lower loan-to-income ratios than these now proposed by the regulator anyway. We embraced the MMR rule and made a significant investment in training our entire mortgage department staff so that they are all fully qualified as mortgage advisors.
"We believe it is beneficial for the society to have a fully qualified mortgage department as well as the frontline managers who meet or deal with customer applications.
"Our ethos champions the importance of face to face advice for customers so the new rules simply reinforce what we were already doing."
For the first six months to 30 June 2014, the Society had completed £21.9 million of new mortgage business compared with £27.9 million for the whole of 2013.