FCA mortgage market study: more change ahead…

The FCA has launched a market study to consider whether competition in the mortgage market can be improved to benefit consumers.

Mortgage market participants should be aware that, despite significant sector change and upheaval in recent years to implement the Mortgage Market Review and Mortgage Credit Directive, more change may now be on the horizon.

What's the study about?

The wide-ranging study will look at the entire customer journey and consider each stage in the mortgage purchasing process. The FCA is seeking to answer two questions:

  • At each stage of the consumer journey, do the available tools (including advice, price comparison websites, best buy tables, mortgage calculators, etc) help mortgage consumers make effective decisions?
  • Do commercial arrangements between lenders, brokers and other players lead to conflicts of interest or misaligned incentives to the detriment of consumers?

The review will focus on first charge residential mortgages although the FCA may consider whether information or findings are also applicable to other markets.

As part of the study, the FCA will also look at the impact its current rules have had on the level of intermediation (and whether this is in customers' interest) and whether there are opportunities for technological solutions to any identified problems.

If the FCA finds that competition is not working well, it is prepared to use its full range of powers to intervene to promote more effective competition.

Mortgage market participants will be keen to ensure the FCA fully understands how the market operates and why before it publishes its recommendations and proposes further changes.

Next steps – rule changes on the horizon?

The FCA will start gathering information from stakeholders soon, including by information request. It will be seeking data, information and views from lenders, brokers and other stakeholders before it starts to perform market research, business model analysis, interviews and/or roundtable discussions.

The FCA intends to publish an interim report setting out its preliminary conclusions and solutions in the Summer 2017, with a final report to follow in Q1 2018.

The Terms of Reference for the study can be viewed here. While the FCA is not consulting on these, comments may be submitted to the FCA before 12 January 2017.

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