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FCA: Mortgage supply chain relationships possible barrier to consumer choice

  • 16/05/2016
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FCA: Mortgage supply chain relationships possible barrier to consumer choice
Commercial supply chains, including the use of panels may be inhibiting consumer choice, a report by the Financial Conduct Authority (FCA) has found.

The findings come from the FCA’s Feedback Statement following the October 2015 Call for Inputs on competition in the mortgage sector, and is one of two industry reports published by the FCA today.

The Call for Inputs statement, drawn from industry feedback which outlined the concerns about commercial panels, added that ‘consumers faced challenges in making effective choices’ particularly on mortgage products, with intermediaries being ‘key to the process’.

Feedback also highlighted the opportunities to make more effective use of technology in the provision of information and advice.

Finally, the work suggested certain aspects of the regulatory framework might have a negative impact on competition.

In the second of its reports, the FCA’s Responsible Lending Review found that firms have positively applied the responsible lending requirements post-MMR, but said there is scope to improve consumers’ ability to make better choices about mortgage deals.

The review, which assessed how firms are applying the responsible lending rules introduced in April 2014, found implementation was in line with expectations overall.

However, the FCA also found no evidence that the rules have prevented firms lending responsibly to consumer groups such as older borrowers and the self-employed.

Further findings include:

• Some firms need to make process improvements to help them consistently assess and record their lending decisions.

• Some firms could be more proactive and consistent in making use of flexibilities and exceptions to the responsible lending requirements for existing customers.

Christopher Woolard, director of strategy and competition at the FCA, said: “For millions of consumers a mortgage is one of the biggest financial transactions they will enter into in their lifetime so it’s encouraging to see firms embrace the spirit and the letter of our rules.

“At the same time, there appears to be more to be done to improve competition in the mortgage sector. Competition can play a key role in ensuring that the sector works well, delivering lower prices, better products and choice, and more innovation.”

The regulator is planning a targeted market study in Q4 2016 which will run to the end of 2017, looking at consumers’ ability to make effective choices, with a view to improving competition.

This will consider issues such as whether tools such as price comparison websites and advice are meeting the needs of consumers, the impact of increased mortgage intermediation on consumer outcomes and the effect of panel and other commercial arrangements in the mortgage supply chain.

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