The Financial Conduct Authority (FCA) has today published proposals for changes to its mortgage sales requirements.
The proposals are one part of a package of remedies from the Mortgages Market Study, published earlier this year. The regulator believes they will help to give consumers more choice in how they buy a mortgage.
This consultation paper (CP) contains proposals to address three harms identified through the Mortgages Market Study.
Firstly, that the FCA’s advice rules and guidance are a barrier to the development of tools to help consumers choose and buy a mortgage.
Secondly, that consumers who would like to buy a mortgage on an execution-only basis find it difficult to do so because they are diverted to advice and because execution-only sales channels are not always easy to use.
Thirdly, that many consumers are overpaying for their mortgages, even when they get advice.
Christopher Woolard, executive director of strategy and Competition at the FCA, said: “The mortgage market is working well for most customers but we have identified some areas where our rules are acting as a barrier to innovation. The changes we’ve announced today will allow firms to develop products and services which can truly meet the needs of customers.”
The FCA is proposing to change its rules to make it clear that tools which allow customers to search and filter available mortgages are not necessarily giving advice. It will also be clearer that some forms of interaction, such as firms helping consumers with their applications, do not require advice.
Where a mortgage adviser recommends a mortgage which is not the cheapest of those that meet the customer’s needs and circumstances, they will now be required to explain why any cheaper mortgage has not been recommended.
The FCA is also making changes to the standards around execution only policies.
The FCA is consulting on the new rules until 7 July 2019 and will publish its feedback and final rules around the end of the year.
Jackie Bennett, UK Finance’s director of mortgages, said: “The FCA’s proposals provide helpful clarity on the boundary between execution-only sales channels and mortgage advice.
“This should help ensure that firms can easily provide factual information to borrowers who opt to go through the execution-only route, helping them to choose or switch product quickly and efficiently. It will also support continued innovation, particularly in digital channels.
“The overwhelming majority of new loans are likely to continue being sold under an advised process, during which customers take part in a lengthy interview with the onus being on the lender or adviser to ensure that the mortgage is suitable for the borrower’s needs.
“UK Finance will be responding to this consultation in due course and will continue working with the FCA to make it easier for customers to choose the right product for them.”