The 85-page interim mortgage market study published last month was broadly positive, recognising the value that advisers have brought for consumers in getting an appropriate mortgage they can afford.
It did highlight a few areas it believes need further consideration. Among these was the suggestion that the regulator ‘could consider clarifying or relaxing [the] rule that is designed to prevent firms steering consumers away from advice’.
The reason it gave for this was the rapid growth of advised mortgage sales, now 80% of the market, and the decline of execution-only to just 20%, brought about by the MMR.
Reassuringly, the paper went on to say the FCA would ‘only want to consider this if there are effective means of fostering execution-only sales across both lenders and intermediaries’.
This links back to one of the central findings in the report, that almost a third of borrowers are failing to get the cheapest suitable mortgage purely because neither they nor their broker has the tools to track it down.
This points to one of the market’s biggest shortfalls – technology.
We are all aware that the market is behind the curve in delivering slick, automated online customer experiences. This finding really underlines the detrimental impact this is having on consumers.
Thankfully lenders, brokers and start-ups across the industry are already investing vast sums into developing better tools to support customers in getting the most appropriate deal for their circumstances.
It will take time to deliver though, which is why the FCA’s acknowledgement that an increasingly ‘volatile interest rate environment’ is likely to increase the risk that customers choosing their own mortgage without the aid of an adviser get stuck on poor value deals is critical.
An uncertain path
You might accuse me of bias given that Precise Mortgages has chosen to be a wholly intermediary lender, but to me this is a really important point.
Consumers don’t care about interest rates, economics and business confidence – it’s boring – until these things hit them personally where it hurts, in the pocket.
And this is the immediate future we’re facing – an uncertain path for Brexit, a likely rise in the Bank base rate and no overnight improvement in the ability of online search tools to help steer borrowers to the right product. Especially given this economic context.
This is why advisers are so important. The FCA concedes that price comparison sites lack sufficient information on whether a borrower will qualify for a deal to be able to offer adequate filtering; intermediary sourcing systems are little better.
But while borrowers left to their own devices are likely to get drawn in by low rates leading them direct to a lender that may or may not be their best option, brokers have the experience and knowledge to build up an accurate picture of which lender to recommend.
Until the technology is there to provide that insight in a robust and consistent way, brokers remain the best way to secure the right mortgage.