Survey reveals unease about mortgage change proposals

Almost a quarter, some 23%, of mortgage intermediaries expect that consumers could choose to bypass advice and arrange their mortgage directly with a lender due to proposed changes, it is suggested.

The Financial Conduct Authority, the UK’s financial watchdog, is proposing to remove prescriptive requirements around firms’ execution only policies, but a new survey suggests this could hit advisors.

The FCA’s proposals, published in May this year, are one part of a package of remedies arising out of the national Mortgage Market Study, which aims to encourage innovation and make it easier for consumers to find the right product.

Advised mortgage sales increased from 70% to 97% of mortgage business following the Mortgage Market Review in 2014, when rules were introduced to improve clarity for consumers over whether their mortgage sale was subject to advice or not.

By confirming that search and filtering tools will not necessarily constitute advice and raising the trigger points at which firms need to divert customers from an execution-only to an advised channel, the FCA believe that a better balance can be achieved.

The latest survey from lender Paragon found that among those brokers who expect the FCA proposals to lead to an increase in direct business, 44% believe the impact on their own business will be significant and 36% think it will present a threat to the broker market.

However, over half of intermediaries surveyed, some 55%, expect the impact of the changes will be minimal, perhaps indicating a belief that consumers are likely to continue to seek advice before making such a significant financial commitment. Some 15% plan to adapt their business models to accommodate the change.

The FCA’s consultation on mortgage advice and selling standards closed on 07 July and is expected to result in a new Policy Statement in late 2019.

‘The mortgage market is set for significant change as technological advances streamline routine processes and make inroads into product comparison and selection,’ said John Heron, managing director of mortgages at Paragon.

‘However, choosing a mortgage is a major financial decision and advice can be critical in helping customers look beyond the headline interest rate to understand the full cost and benefits of alternative products. Advice is also essential when arriving at an optimum solution for customers with complex requirements,’ he added.