Lenders benefit from MMR with product transfers

superdudeo

Correct me if I am wrong but isn't this new MMR a great excuse for lenders to keep their customers on SVR?

There must be millions of people out there that would fail new MMR rules when their existing fixed rates comes to an end. So what happens? Lender insists on applying MMR affordability checks, they fail and customer will remain on SVR - lender profits. Lender will be safe in the knowledge that if they cannot pass the affordability checks with their current lender, they certainly won't elsewhere either.

Looks like Halifax are already doing this even though the FCA say it's not required for product transfers where the term or amount of loan doesn't change.

amnblog

I have heard that view voiced before.

RedDwarf82

superdudeo wrote: »

Lender will be safe in the knowledge that if they cannot pass the affordability checks with their current lender, they certainly won't elsewhere either.

In a competitive market a bank would not apply the affordability checks and would get all the clients. Seeing this, the rest of lenders would do the same to stop losing clients.

To be honest, IMHO this isn't a big evil plan from lenders. It's just its usual incompetence. They are really confused by the new rules.
At some point somebody will realize they are behaving stupidly and everything will go back to normal. Hopefully soon...

amnblog

They don't do much by accident Dwarf!

superdudeo

RedDwarf82 wrote: »

In a competitive market a bank would not apply the affordability checks and would get all the clients. Seeing this, the rest of lenders would do the same to stop losing clients.

To be honest, IMHO this isn't a big evil plan from lenders. It's just its usual incompetence. They are really confused by the new rules.
At some point somebody will realize they are behaving stupidly and everything will go back to normal. Hopefully soon...

I am optimistic that the situation will improve but got to feel sorry for people needing to transfer now. I think by the new year things will have settled.

amnblog

I don't share your optimism

Thrugelmir

superdudeo wrote: »

Correct me if I am wrong but isn't this new MMR a great excuse for lenders to keep their customers on SVR?

Lenders made some very poor underwriting decisions in the credit boom when mortgage rates were cross subsidised by PPI income. Now margins have to rise to pre credit boom levels. Not least that both regulatory fees and tax on bank profits has been increased. Easy to forget that the bail of the Icelandic banks is still being funded by levies on banks today (and therefore borrowers are picking the tab up).