Financial watchdog publishes proposals on mortgage sales

Proposals for changes to mortgage sales requirements which will help to give consumers more choice in how they buy a mortgage have been announced.

The proposals from the Financial Conduct Authority (FCA) are one part of a package of remedies from its Mortgages Market Study, published earlier this year, which aims to encourage innovation and make it easier for customers to find the right mortgage.

The FCA identified a number of ways its advice rules are acting as a barrier to the development of new tools to help customers choose and buy a mortgage and the consultation today is designed to address the problems identified.

‘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 will allow firms to develop products and services which can truly meet the needs of customers,’ said Christopher Woolard, executive director of strategy and competition at the FCA

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. It is consulting on the new rules until 07 July 2019 and will publish its feedback and final rules around the end of the year.

According to Jackie Bennett, director of mortgages at industry body UK Finance, the 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,’ she explained.

‘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,’ she said.

‘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,’ she added.