UK financial watchdog to see if current mortgage market can be improved for buyers

The UK’s financial watchdog has launched a market study to consider whether competition in the housing mortgage sector can be improved to benefit consumers.

The Financial Conduct Authority (FCA) said it wants to understand whether consumers are empowered to choose on an informed basis between products and services and are in a position to understand whether these represent good value for money.

The market study will explore two questions: whether the available tools, including advice, help mortgage consumers make effective decisions and whether commercial arrangements between lenders, brokers and other players lead to conflicts of interest or misaligned incentives to the detriment of consumers.

The FCA will also review whether there are opportunities for better technological solutions to problems it might identify, including greater use of digital channels to deliver information or advice.

During the study, the FCA said it will be engaging with a wide range of market participants about their experiences and it aims to publish an interim report in the summer of 2017, setting out its analysis and preliminary conclusions with the final report expected in early 2018.

‘As a mortgage is likely to be the biggest financial commitment most people make in their lifetime, we’re keen to ensure that competition in the mortgage sector is healthy and working to the benefit of consumers,’ said Christopher Woolard, executive director of strategy and competition at the FCA.

The Council of Mortgage Lenders welcomed the review and described it as having a ‘focused and constructive’ especially in terms of potential influences on customer outcomes now that the changes brought in under the Mortgage Market Review have had a chance to bed in.

The CML will consult with members in responding to the FCA, but in the meantime sees it as helpful that the FCA is looking at the whole range of players involved in the mortgage and house buying process, as well as at the potential offered by technology.

The organisation, whose members make up the vast majority of lenders in the UK, believes that it is important to understand what drives and influences the products that consumers have access to and ultimately choose.

CML director general Paul Smee said that a clear understanding can only be good for the customer interest and the CML looks forward to working with the FCA and other industry participants as the market study progresses.

He pointed out that FCA rule changes in 2014 created a seismic shift in how mortgages are sold. ‘It is entirely right that the regulator reviews their effect, as well as how commercial relationships in the market have developed in the light of the new environment,’ he said.

‘Any opportunity to review how the market can best work for the benefit of consumers is an opportunity worth taking, and we will be participating constructively,’ he added.