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FSA warns over European mortgage directive


The FSA has expressed concerns about various proposals from Europe on future regulation of the mortgage market, including plans to enforce whole of market mortgage advice.

Speaking at the Council of Mortgage Lenders’ annual conference today FSA director of conduct policy Sheila Nicoll (pictured) welcomed the fact that the European Commission had recognised the benefits of diverse national mortgage markets, but said there were aspects of the EC’s mortgage market proposals that “caused the FSA difficulty”.

Nicoll said the level of detail and disclosure being proposed by the EC for advertising and generic material  risks “information overload” and key points being “lost in a deluge of other information”.

She is also concerned about consumers being forced to take whole of market mortgage advice, rather than having it as an option to choose from.

Nicoll said: “A further concern of ours, which we know many lenders share, relates to who can give consumers advice. As first drafted, the European proposal means that only those firms who look across the whole of the market can give advice.  We think this is a much too narrow view.”

Nicoll says around half of UK borrowers who take out a mortgage directly with a lender benefit from the lender giving advice on the best product in their range, and borrowers also benefit from advice from brokers who offer a limited range of products.

She added: “Consumers should, of course, be able to opt for whole of market advice, an option taken up by more UK consumers than in any other member state. But the advice provided by lenders and intermediaries still forms an important service, which the directive will prevent unless changes happen.”

Nicoll also highlighted concerns about proposed powers for the EC to impose additional requirements on the mortgage market at any time, risking “constant and costly change” and causing detriment to firms and consumers.

She criticised Europe’s plans to impose certain consumer rights on all mortgages, such as the ability  to convert a foreign currency loan into a consumer’s home currency, the ability to port a mortgage and to underpay or overpay, and the right to transfer a mortgage to another borrower.

Nicoll said: “In our view it is one thing for consumers to opt to have these features and to pay for them. It is another for these features to become rights and to be forced on all consumers.

“This means that consumers who do not want these features still end up paying for them. We think that the introduction of these rights will ultimately limit flexibility and choice for consumers.”


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There are 14 comments at the moment, we would love to hear your opinion too.

  1. Advice from banks! She must be having a laugh. Lenders dont give advice, thats the whole point, applicants choose from a product range and if its the wrong one, tough, it was down to them.

  2. Of course the FSA are concerned about clients being forced to take “whole of market” advice as it will be at odds with the cosy relationship it has built up with the Banks since it’s inception. This European proposal seem to be fully in line with the FSMA 2000 Act principles of Consumer protection – shame that the FSA has forgotten this is an essential reason for their existance!

  3. Got to agree with John Morgan on this one. it would appear that the FSA want a limited advice regime with a limited number of companies, whatever the product. Makes their job a lot easier!

  4. Perhaps the FSA should be concerned with the fact that our financial system is showing signs of impending collapse – just a thought.

    It may save time if the FSA issued a list of things that they aren’t in fact warning about/worrying about/probing etc as we seem to have several of these announcements each day. Does anyone listen anymore?

  5. So the FSA think Independant advice that looks across whole of market is ‘much too narrow view’ they don’t think for one moment that 50% of the borrowers perhaps need extra help by gaining from independant advice. I wonder whose pocket Sheila Nicoll is in and where she has been gaining her world wide experiance.

  6. Whole of Market…at last someone has seen sense! Everybody knows that for the majority of people that is the ideal. It should be adopted right away. Banks and limited ranges are not best for most people, they rely upon people too lazy to have a good look around!

  7. How on earth can anybody have an issue with getting whole of Market advice…. again I am shocked at the FSA’s double standards in different sectors. I agree that this is the one of few European proposals that actually make sense!

  8. Can we please have a whole of market regulator as it is quite obvious that the FSA and Sheila Nicoll are only interested in giving limited advice to Banks. Yet another example of a regulator in the pocket of their friends the Banks.

    While on this subject why is it that banks and building societies are able to offer better products direct then they can through their brokerage arms !!! Isn’t it a joke!! This is obviously a deliberate tactic on behalf of the banks and building societies and regulator to put IFA is out of business. Thank God for Europe.

  9. Roger Chadbourne 3rd November 2011 at 4:16 pm

    Nicoll said the level of detail and disclosure being proposed by the EC for advertising and generic material risks “information overload” and key points being “lost in a deluge of other information”.

    That’s funny. That’s what most of my clients say about my (FSA compliant) Suitability Reports.

  10. Nicoll also highlighted concerns about proposed powers for the EC to impose additional requirements on the mortgage market at any time, risking “constant and costly change” and causing detriment to firms and consumers.

    Blimey – not the kind of behavior we would expect from the regulator of the UK financial services industry!!!

  11. From these replies the strength of feeling is that “whole of market” is the desired route for consumer protection – to have a chance of making this happen please lobby your Mortgage Clubs, MP’s & MEP’s!

  12. First off let’s recognise that there is no way Banks and Building Societies are going to be stopped from selling their products direct to consumers.

    Once you accept this fact then it is better that they can give advice rather than just have an information only sale – ie here is a list of our products, you choose.
    If the borrower makes the choice this is not an advised sale and there is no protection. This is not a good outcome.

    If the adviser recommends the right product from their range then the borrower has protection and can get compensation for being wrongly advised.

    When you consider this in context the FSA are absolutely right to aim to get limited range advice agreed as part of the EU Directive.

    The other aspect on this topic is that there is a possibility that the definition of whole of market from an EU perspective may include all offerings regardless of whether the deal is available via an intermediary or if proc fees are paid.

    How many of you would like to rely only on clients willing to pay a fee for mortgage advice (an area not hit by the RDR)?

    A bit of food for thought eh!

  13. @ Complaince Man 9:38, some interesting points, would a ban on no advised/execution only sales therefore lead to better quality ‘advice’ from banks?

    Can give advice or should give advice?

  14. @ IFA 11.02 – it is virtually impossible to ban execution only sales as there are too many people who could justly argue they are sufficiently aware enough to make their own choice. How would you buy your own mortgage given you can’t advise yourself?

    It is better to push banks etc to give advice – whether that is better or not depends on the quality of the management who set the standard and monitor performance. Personally I would like them to give advice rather than sell non-advised.

    The key aspect though is that they have deep pockets and can afford to pay any compensation that arisies from poor advice or any other breach of regulations.

    At the end of the day consumers need to be able to make their own choice as to how they buy and whether or not getting the absolutely best deal is the most important factor (generally not otherwise most shops would go out of business).


    That should sort things out!

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