The proposals look to encourage innovation in online offerings and execution-only models.
And while I completely understand that, in a world where you can buy almost anything online, there is a demand for more efficient financial services, I am baffled and slightly concerned at this latest proposal.
Buying a mortgage is not a simple transaction. There are so many more things to consider than headline rates, terms and set up fees.
The most significant thing to think about is, ‘what happens if you cannot make your payments anymore?’
Not tuned in to protection
According to Royal London, 42 per cent of people with a mortgage have no life cover in place; 71 per cent have no protection in place should they become diagnosed with a critical illness, and 81 per cent have no income protection.
As a society we are not tuned in to the importance of protection.
In the UK, protection is not bought, it is sold.
And while anyone who is looking to buy a home will know that they need a mortgage, they will not necessarily think about the importance of getting protection to go with it – especially if it is their first home.
All borrowers need to consider the importance of protection, but they will not do that if they use an execution-only solution.
Unpicking the MMR
After the financial crisis, the Mortgage Market Review (MMR) highlighted the importance of proper advice to try and prevent consumers from getting themselves tied to mortgage debt that they can’t handle.
The only way we can ensure that this will not happen again is to make sure consumers completely understand the level of debt they are taking on and how to protect themselves if circumstances change.
And this cannot be done if consumers sign up to mortgages without advice.
Advising on a mortgage is obviously the initial role of a mortgage broker, but one of their key responsibilities is to talk about protection.
And while execution-only may be able to cover off some of the broker’s role in terms of searching through mortgage deals, it will never be able to replace the vital role brokers play in encouraging borrowers to take out that all important protection.
The FCA has itself admitted that any harm from being unnecessarily channelled into advice “does not appear to be large”.
By pushing for more execution-only services and away from broker-led mortgage advice, the FCA could inadvertently put many potential borrowers at risk.
I understand that for many customers, execution-only models would be suitable, but it would be dangerous to push non-advised mortgages to the masses and in my opinion, this flies in the face of all the good work the FCA has done with the MMR.
When treating customers fairly is one of its central tenets, surely the FCA should be doing more to encourage people to take advice, not push them away.