The number of borrowers moving to a new lender thanks to Modified Affordability Assessments (MAAs) more than doubled in the wake of the FCA’s changes to the regime last summer, Stonebridge can reveal today.
Between the introduction of the new rules in July and the end of last year, the number of remortgages arranged with a new lender using MAAs more than doubled, rising 126% year-on-year to 9,664 from 4,275, exclusive data from the FCA shows.
By comparison, the number of product transfers that used MAAs in the same period barely moved, rising from 269 to 290 while the number of separate lenders using MAAs increased from eight to 12.
Lenders can now use MAAs when borrowers want to reduce their mortgage term, or when a mortgage with a new lender is more affordable than either their existing home loan or a new product from their current lender.
Stonebridge chief executive Rob Clifford welcomed the rise in MAA use but stressed that a massive opportunity remains, with “plenty of scope” for more home owners to benefit. He believes some borrowers will still be wrongly assuming they lacked options and would be better off taking their existing lender’s product transfer offer without taking advice. The industry may also still be adjusting to the new freedoms.
He urged advisers and lenders to become even more proactive in helping customers understand that they’re not necessarily stuck with their existing lender, even if their circumstances have changed.
Rob Clifford, Chief Executive at Stonebridge, said: “When the FCA made this change last summer, MAAs struck us as a boon for consumers but more must be done to help them take advantage. MAAs are a game-changing opportunity for many homeowners, giving them much greater flexibility to lower their borrowing costs.
“There are many circumstances where homeowners fear affordability tests and wrongly assume they must stick with their existing lender. This is where a mortgage adviser can really come into their own and it’s a huge opportunity with plenty of scope for many more borrowers to benefit.
“One of the ways they can do this is by making the most of their existing customer relationships and the data they hold on mortgage expirations. The trajectory of interest rates may be uncertain right now because of conflict but, as rates come down over the long term, guiding borrowers to better financial outcomes is going to become increasingly valuable to them. For many customers, taking the easy option and going direct to a lender without shopping around could prove to be a very costly mistake, and one they’re stuck with for years.”
MAA rules also appear to disproportionately help those with higher repayments. The average (median) LTV for MAA remortgages with a new lender was 54.4% since the rule change, whereas for MAA remortgages with existing lenders it was just 25%. External remortgagers borrowed an average of £200,999 while those remortgaging with their existing lender borrowed £95,4881.
The FCA released the data to Stonebridge in response to a Freedom of Information Act request. A lag means some sales contained in the data would have been approved before the rule changes.
Stonebridge is the second-largest mortgage-focused network by number of ARs firms, adding more ARs than any other similar network last year for the fourth year running.
