The All-Party Group on Challenger Banks and Building Societies (CBBS APPG) has urged regulators and the Treasury to collaborate with the entire mortgage market, including challenger institutions and smaller lenders, in order to foster innovation and diversification within the sector.
The group highlights the importance of including all market participants in discussions and decision-making processes to create a more competitive, inclusive, and dynamic mortgage landscape.
The recommendations form part of a comprehensive report on the current state of the UK mortgage market released by the CBBS APPG.
Based on a roundtable discussion with industry experts, the report identifies several key issues and offers recommendations to improve market conditions for both lenders and borrowers.
One of the primary concerns raised by the CBBS APPG is the need for easier access to mortgages, with the report suggesting that homeowners who can afford a mortgage should be able to obtain one, as is the case in other countries like Denmark and the United States.
The group also calls for mortgage lending and regulation to be based on affordability rather than arbitrary caps.
The report highlights the need for more streamlined regulation and advocates for a single regulator, preferably the Financial Conduct Authority (FCA), to oversee the mortgage market. This move would help manage risk for both borrowers and lenders while encouraging innovation, fintech models, new entrants, and diversification in the market.
Increased competition in the UK mortgage market is also a key recommendation of the CBBS APPG. The group urges regulators and the Treasury to engage with the entire market, not just major lenders, to foster innovation and diversification. This would, it said, help challenge the status quo and create a more competitive and diverse mortgage market.
Solvency II reform is another area identified as needing acceleration in order to bring fresh capital into the UK mortgage market.
Additionally, the report calls for more radical solutions for later-life lending, noting that borrowers in the UK are at a significant disadvantage compared to those in other major economies.
Finally, the CBBS APPG emphasises the necessity of supply-side reforms to increase the availability of homes in the UK.
The group recommends the government prioritise building more houses and appease objectors by constructing aesthetically pleasing and better-constructed homes, in line with the recommendations from the Building Better, Building Beautiful Commission report published in 2020.
In conclusion, the CBBS APPG believes that bold action is needed to address the issues in the UK mortgage market and make housing more accessible for more people.
The group strongly urges the Treasury and the Bank of England to reconsider the effects of the Mortgage Market Review (MMR) and explore how long-term fixed-rate mortgages could help homeowners and increase financial stability in the UK.
