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FCA report eyes mortgage prisoners and broker comparison tool

Real estate offer. Businessman holds an artificial model of the houseThe FCA has singled out mortgage prisoners, shopping around and a broker comparison service as areas of the market that need change.

The FCA made the statements today in its interim report into mortgage market competition, first mooted in 2015.

The report says a third of consumers fail to find the cheapest mortgage deal, but the sector still works well for most people. The FCA believes there are overall high levels of choice and consumer engagement.

It adds that there is little evidence mortgage firms’ current commercial arrangements lead to poor outcomes.

However, the regulator says there is no easy way for consumers to know which mortgages they qualify for at an early stage, which hinders shopping around.

The FCA adds that mortgage prisoners are an ongoing problem.

The financial watchdog says it has found ways to make the market work better for borrowers and will push these.

FCA data sheds light on mortgage broker numbers

These include finding ways to make it easier for consumers to shop around earlier in the mortgage process.

These also include drawing up metrics to help consumers compare mortgage brokers. The regulator says it will work with brokers on this.

The FCA also wants to help mortgage prisoners by exploring possible solutions.

An FCA statement says: “The FCA intends to explore options to help these customers, for example an industry-wide agreement to approve applications for a new mortgage deal from existing customers whose most recent mortgage was taken out before the financial crisis and who are up-to-date with payments.”

Additionally, the regulator says it will remove barriers to innovation in mortgage sales, including changing its own advice and guidance.

The regulator will put out a full report by the end of the year.

FCA executive director of strategy and competition Christopher Woolard says: “The mortgage market is one of the largest financial markets in the UK and there have been significant changes to the market since the financial crisis in order to ensure that we do not return to the poor practices of the past.

Robo changes could take business off traditional mortgage brokers, FCA says

“For many the market is working well with high levels of consumer engagement. However, we believe that things could work better with more innovative tools to help consumers.”

The FCA has shown an interest in mortgage competition since March 2015, when it published its 2015/16 business plan.

The plan said the regulator wanted to check barriers to competition in the mortgage sector.

In December 2016 the FCA formally launched its market study into the issue.

The study looked at whether commercial arrangements between lenders, brokers and other players lead to conflicts of interest or “misaligned incentives” that harm consumers.
It also investigated if consumers can make “effective decisions” at each stage of the buying process, and how tools and advice affect this.

The regulator wanted to publish an interim report in the Summer of 2017 and the full report in early 2018.

However, the timeline got dragged out because the project had created more work than the FCA had predicted.

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Comments

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  1. Simon Webster 4th May 2018 at 4:26 pm

    This is an easy fix and something that could be sorted in 5 minutes. Simply deem clients to have passed all affordability assessments by paying their mortgage in full and on time for say 24 months. A new lender could take the case over and potentially give clients a better deal without requiring everyone to jump through unnecessary hoops…But bless the FCA, if there’s a hard way to fix something and an easy way – they always plump for hard.

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