Andrew Strange Senior Policy Analyst AMI & EQUITY RELEASE ROAD SHOWS APRIL 2008 Regulation,...

Andrew StrangeSenior Policy Analyst

AMI & EQUITY RELEASE ROAD SHOWS

APRIL 2008

Regulation, regulation, regulation.

AGENDA

• The mortgage market and demand for professional advice

• Perceptions of equity release• The equity released market• Regulation:

• UK• Europe

• Key regulatory guidance and tips

THE MORTGAGE MARKET

• The Mortgage Market:– 11m borrowers– >6m transactions in 3 years– >70% distributed through intermediaries

• Clear demand for professional advice

5.7m mortgage sales in PSD• 92% of intermediary sales “advised”• 40% of Direct sales had advice

Product Sales Data:• 72% of tracker products sold through intermediaries• 86% of Standard Variable Rates sold through lenders.

Cuts in BBR but not SVR?

Clear benefit to receiving professional advice

FSA FIGURES

The UK residential mortgage market

Source: FSA, PSD 1st April 2005 to 30th September 2007

PERCEPTION OF EQUITY RELEASE

Areas to expand:

AMI Census Results

EQUITY RELEASE MARKET

• 80% of Lifetime Mortgages sold via intermediaries

• 2005: £1,168m• 2006: £1,213m• 2007: £1,260m

• If anything, the more complex the product the greater the need for advice

CML/SHIP Research

Equity Release

Different consumer ‘profiles’:Those in need of incomeThose who desire extra incomeHNW – tax mitigation

A broad range of potential clientsMortgage Advice?Financial Planning?

Equity Release

• Comparative Strength of Market

• Lack of credit risk

• Innovative products and providers

• Net housing equity

• Increasing public debate and interest – pension reform, public social agenda

• Strong representation – AMI/AIFA, SHIP

REGULATION - UK

• Mortgage Effectiveness Review & NewMCOB?

• Thematic mystery shopping - 2005/6

• Sale and Leaseback

• VAT

• TCF

REGULATION - UK

• Mortgage Effectiveness Review

• Part II of the post-implementation review of MCOB

• Forms part of the broad review of MCOB

• Move to principles based regulation

• Assesses five outcomes

• Lifetime mortgages fair well!

Effectiveness Review - Outcomes

1: Consumers shop around

2: Consumers don’t tend to understand the advice and information-only distinction

3: Consumers understand risks

• “In the quantitative research, 96% of the respondents who had spoken to a professional adviser did not reject their adviser’s recommendation and most purchased the recommended product.”

REGULATION - UK

• Thematic work of 2005/6 is complete.

• Sale and Leaseback – a threat?

• VAT disparity of home reversions and lifetime mortgages.

REGULATION - EUROPE

• Mortgage Credit White Paper– APR– KFI– Early repayment– Access to credit data

• Lessons to learn?

• Or opportunities to teach?

Key Regulatory Actions:

• Perception as high risk

• Underlying strength of regulation

• Suitability

• Fact-finding

• Interaction with State Benefits

• Dabblers

• TCF

TCF

5%

1%

13%

41%

40%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Don't know

We've not yet identified ourMI requirements.

We are beginning toconsider our MI needs

We are significantlyunderway in our MI work

We fully collect, analyseand evidence our MI

In terms of gathering Management Information (MI) to evidence TCF, how prepared is your firm?

TCF REGIME

At last!We now know the answers to the question!

•Management information must be collected and used•Some how MI must be tied into the 6 consumer outcomes•External Data must be collected and used on an ad hoc basis (FSA newsletters, media, AMI factsheets etc) •All members of staff must be able to talk a supervisor about the firms awareness of TCF•And finally - firms must seek external feedback on their MI

TOP TIPS!You will ‘fail’ without these

TCF REGIME

• External Feedback:– Age profile– Loan-to-value– Lump-sum verses Drawdown

• Ask and document! Even if you don’t actually get!

On the front foot• The champion of the

profession• Regulatory campaigning• Political lobbying• European lobbying• Media• Consumerists• Reputation• Service standards

Events and help• Conferences • Seminars• Helpline• Fact sheets• Get involved, get elected!

OUR WORK

With your help

Association of Mortgage Intermediaries

Our website:

WWW.A-M-I.ORG.UK