Your November update from AMI Chief Executive Robert Sinclair

AMI Chief Executive Robert Sinclair gives his November update, including AMI’s Protection Viewpoint, market conditions and future challenges for advisers…

Making the most of AMI Protection Viewpoint findings

AMI’s 2023 Protection Viewpoint report ‘The Perception Gap’ is packed full of findings and insight aimed at mortgage intermediaries…

Consumer Duty – an update

Key Consumer Duty developments and recent communications issued by both AMI and the FCA, with commentary on implications for mortgage intermediary firms…

AR regime – updated AMI Q&A and deadline reminder

Having heard back from the FCA, we have updated AMI’s Q&A documenton the AR regime. We also wanted to remind firms of the upcoming 30 November 2023 deadline…

FCA application window open for firms approving promotions for unauthorised persons

Firms that approve financial promotions for unauthorised persons have until 6th February 2024 to apply for approver permission from the FCA…

FSCS levy and compensation figures update

The FSCS has released an update on its levy and compensation figures for 2023/24, as well as anticipated levy figures for 2024/25…

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Following various high profile warnings over rising consumer debt, the Financial Conduct Authority has said it will review the sector. This covers credit cards, personal and unsecured loans and car finance, the latter of which has ballooned in recent years with the popularity of personal contract plans.

Latest figures from the Bank of England show that while borrowing against our homes is falling back, unsecured borrowing continues to grow quickly. April saw consumer credit grow £1.5 billion, pushing the annual growth rate up from 10.2 per cent to 10.3 per cent. This was largely driven by growth in credit card lending from 8.9 per cent in March to 9.7 in per cent in April, when the Financial Policy Committee warned that this explosion in consumer debt is putting financial stability at risk. Not only is the risk of arrears on consumer credit higher than in the mortgage sector, these loans are also being securitised and sold on to other investors. Indeed, recent headlines have begun drawing comparisons between sub-prime car loan contagion in the US and the credit crunch in 2007.

Concern is mounting that the underwriting standards applied to consumer lending are insufficient. This is particularly worrisome given the introduction of clear affordability rules on mortgage lending in 2014 under the Mortgage Market Review and the inclusion of consumer credit lending into the FCA’s regulatory remit also in 2014.

It is clear that the affordability standards required of mortgage lenders are not being applied in the sale of personal and car loans, PCP and credit cards, despite this being a requirement of the FCA consumer credit conduct rules.  If the philosophy that sits behind the MMR rules on affordability has taught the market anything, it must be that a credit score in isolation is an insufficient measure of whether a consumer is able to afford to repay debt.

Increasing reliance on short-term, expensive forms of debt over the long term may reflect both stricter affordability criteria from lenders on mortgage borrowing preventing equity withdrawal and a decade of little to no real wage growth. This is particularly acute for the younger and still working generations whose incomes have not been protected by the Government’s triple lock on the state pension. The endemic lack of real income growth for the younger generation is becoming problematic, and if it persists, will likely pull house prices down over the medium to longer term.

Robert Sinclair
June 17


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