With the mortgage market review consultation period now over, the horse-trading between the intermediary representatives and the lending community now begins in earnest.

The heart of the discussion will clearly be over advised sales and what can be interpreted as execution-only, especially in the call-centres and non-client-facing operations of the mortgage lenders.

I recently read the views of the Building Societies Association’s head of mortgage policy Paul Broadhead, who was questioning how this change of policy could affect consumers and why it could potentially confuse them even more.

As I see it, lenders have already reacted. We can see this in the changes they have made to their policy and criteria linked to interest-only loans, loans into retirement, fast-track and those potential borrowers with relatively minor issues in their credit history.

These changes are now having an impact on consumer choice, especially with regard to those people who are borrowing, or want to borrow, at the margins. Over the last few weeks, the most popular comment that has been made to me by intermediaries regarding lenders’ underwriting attitude is one of “zero tolerance”.

Whereas in the past, an under-writer would take a view on the client’s circumstances, “not any longer” is the message now coming back from lenders and intermediaries.

Speaking from the intermediary perspective, many of us initially thought the MMR was a discussion document that would benefit the adviser. The client should only be receiving an advised sale, which sits at the heart of an intermediary’s proposition and therefore plays to our strengths.

But now we find that some lenders are restricting consumer choice through over-zealous underwriting, and I assume a lack of funding, especially where the higher loan to value is part of the proposition.

If that is not enough, the next battle to be fought will be over the challenges on distribution and the relationship that exists between lenders and knowing who their intermediary is.

The major networks have already been asked to provide evidence of the systems and controls they have in place to manage their appointed representatives, where the risk of advice within a sale is covered by the network principal.

A similar requirement for the directly authorised sector will pose a greater challenge, as DA firms will also be subjected to the same stringent requirements, regardless of their size and background.

Many smaller firms have provided excellent advice and support to clients over many years, and a further erosion of this sector will affect customer choice. The next three months will determine how the mortgage market will look for the next few years, with protection over choice likely to be one of the defining factors.

John Malone is executive chairman of PMS