In its response to the Financial Service Authority’s Mortgage Market Review proposals it says it is concerned about the intended move to a fully advised mortgage market and consumer reaction to the extra information that lenders will have to collect to assess affordability.
‘The policy decisions of this government are focused on putting consumers back in control of their own finances. The proposal from the FSA to move to a fully advised mortgage market flies directly in the face of this taking consumer control in the opposite direction,’ said Paul Broadhead, head of mortgage policy at the BSA.
‘The FSA is right to ensure that vulnerable consumers always get mortgage advice. That said, to force other financially savvy consumers with previous experience to take advice, whether they want it or not, runs the real risk of detaching the applicant from both decision and process,’ he explained.
‘We understand that the move to a fully advised market is designed to solve the issue of consumer confusion. This can happen if a lender or an intermediary is not crystal clear with a mortgage applicant about whether they are receiving advice on what's right for them or just information
on the product range and features available. If this is true, this issue can be addressed simply, and with no risk of unintended consequence, by tightening the disclosure requirements for lenders. This will ensure that a consumer has a clear choice on having advice or information when they first apply,’ he pointed out.
He believes that under the proposed new regime consumers will have to get used to far more intrusive questioning from lenders and lenders will need to get used to asking more probing questions and it will take adjustment on both sides.
‘Some management of consumer expectation and understanding, perhaps through the Money Advice Service would be helpful before 2013 to avoid a potential consumer backlash,’ he said.
‘Even with these significant concerns, we welcome the substantial shift made by the FSA compared to the controversial set of proposals published in 2010. The proposals on the table now are broadly sensible and in many areas are likely to deliver the intended outcomes,’ he added.
