Mortgage Market Review (MMR)
Published: 06/08/2015 Last Modified: 28/09/2015
This section outlines the main changes made by the Mortgage Market Review (MMR). It is a good place to start for anyone new to this subject as it outlines what the MMR was about and shows where you can get further information. It is also for firms looking for help implementing the new MMR rules.
What was the MMR?
The MMR was a comprehensive review of the mortgage market, which started with a Discussion Paper in 2009 and culminated in a Policy Statement and final rules in October 2012. All policy papers are listed at the bottom of the page.
What is the background to this?
The MMR set out the case for reforming the mortgage market to ensure it is sustainable and works better for consumers.
It had become clear by the height of the market in 2007, that, while the mortgage market had worked well for many people, it had been a cause of severe hardship for others. The regulatory framework in place at the time had proved to be ineffective in constraining particularly high-risk lending and borrowing. The MMR package of reforms is aimed at ensuring the continued access to mortgages for the great majority of customers who can afford it, while preventing a return to the poor practices that we saw in the past.
What will the MMR mean for firms?
The majority of the MMR changes came into effect on 26 April 2014. Those that will be most relevant are:
- The removal of the requirement on intermediaries to assess affordability.
- The removal of the non-advised sales process.
- Most interactive sales (e.g. face to face or telephone) to be advised.
- An 'execution only' sales process for non-interactive sales (internet and postal).
- Every seller required to hold a relevant mortgage qualification.
- It is no longer compulsory to provide customers with an Initial Disclosure Document (but firms can continue to do this if they want to). Instead, certain key messages about a firm's service must be given to customers.
- The Key Facts Illustration doesn't have to be given every time the firm provides the customer with information about a product that is specific to them. Instead, it is only required where a firm recommends a product or products, where the customer asks for a KFI, or where the customer has indicated what product they want in an execution-only sale.
- Lenders are fully responsible for assessing whether the customer can afford the loan, and they have to verify the customer's income. They can still choose to use intermediaries in this process, but lenders remain responsible.
- Lenders are still allowed to grant interest-only loans, but only where there is a credible strategy for repaying the capital.
- There are transitional provisions in the MMR that allow lenders to provide a new mortgage or deal to customers with existing loans who may not meet the new MMR requirements for the loan. The borrowing is not able to exceed the amount of their current loan, unless funding is required for essential repairs. The decision on whether or not to lend in these cases remains with the lender.
Second charge mortgages: The government decided that the responsibility for regulating second charge mortgages should transfer to the FCA alongside the wider transfer of consumer credit regulation in April 2014.
The Mortgage Credit Directive (MCD): The MCD comes into force on 21 March 2016 and introduces an EU-wide framework of conduct rules for mortgage firms.
Find out more about the MCD.