In the interim report, published this morning, the regulator found that competition means the mortgage market is ‘working well for many people’.
However, despite the high levels of choice and engagement in the market, more can be done to help consumers find the best priced, suitable mortgage deal and to free mortgage prisoners, it said.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “The mortgage market is one of the largest financial markets in the UK and there have been significant changes to the market since the financial crisis in order to ensure that we do not return to the poor practices of the past.
“For many the market is working well with high levels of consumer engagement. However, we believe that things could work better with more innovative tools to help consumers.
“There are also a number of long-standing borrowers that have kept up-to-date with their mortgage repayments but are unable to get a new mortgage deal; we want to explore ways that we, and the industry, can help them.”
The market study, which launched on 12 December 2016, set out to find out if consumers had enough information to make effective decisions and whether commercial arrangements, such as mortgage lender panels, led to conflicts of interest for consumers.
The conclusions
The FCA’s interim findings show:
· high levels of choice and consumer engagement: over three quarters of consumers switched to a new mortgage deal within six months of moving onto a reversion rate; and
· little evidence that current commercial arrangements between firms are leading to poor consumer outcomes; but
· there is no easy way for a consumer to be confident, at an early stage, of the mortgage products for which they qualify – this is a significant impediment to shopping around;
· a significant minority of customers (around 30%) fail to find the cheapest mortgage for them; and
· a number of longstanding customers would benefit from switching away from a reversion rate but cannot, despite being up-to-date with payments; most took out a mortgage before the financial crisis.
The FCA recommends the industry make it easier for consumers to identify the mortgage products they qualify for, to assess and compare those products and, ultimately, to take out a mortgage. It also wants to remove barriers to digital innovation in mortgage sales, including those due to advice rules and guidance.
Mortgage prisoners are also a target and the FCA wants to explore options to help these customers, including an industry-wide agreement to approve applications for a new mortgage deal from existing customers, whose most recent mortgage was taken out before the financial crisis and who are up-to-date with payments.
The regulator estimates there may be up to 30,000 of these borrowers.
The FCA also believes there may be customers up-to-date with repayments on a reversion rate in mortgage books owned by non-regulated firms – it estimates around 120,000 may benefit from switching.
Lynda Blackwell, ex-FCA mortgage sector manager, architect of the Mortgage Market Review and consultant, said: “Great to see an acknowledgement that the market is working well for most consumers. The industry has put a lot of effort into ensuring that’s the case. From my recent experiences working with the industry it seems clear that there is still scope to bring the pendulum back from where it is today, especially when it comes to the so called ‘mortgage prisoners’.”
Blackwell added: “It’s good to see the FCA willing to work with the industry in bringing more balance back. Also good to note the acknowledgment of the role technology can play in achieving this. Technology has put the customer in the driving seat in other sectors and the mortgage market needs to catch up.”
The FCA is consulting on its interim findings and proposed remedies and will publish a final report around the end of the year, with further consultation if needed.
The Mortgages Market Study looks at first-charge, residential mortgages and buy-to-let and commercial mortgages are not in scope.
The FCA is seeking feedback by 31 July 2018 to MortgagesMarketStudy@fca.org.uk
