The Association of Mortgage Intermediaries (AMI) and Building Societies Association (BSA) have raised concerns over the Financial Conduct Authority’s (FCA) preoccupation with cost in the mortgage market.
The regulator’s interim MMS report showed that while the mortgage market is working well in the main, around 30% of customers did not end up on the cheapest deal.
As a result, the FCA suggested more innovation and technology solutions are needed within the market to get better consumer outcomes.
Paul Broadhead, head of mortgage and housing policy at the BSA (pictured), said: “The focus on price alone as the primary metric to delivering a good customer outcome is misguided.
“Customers take into account a range of factors when deciding which mortgage is right for them, and the vast majority do so following advice from a lender or mortgage intermediary.
“When considering responses to the interim report the FCA should be mindful not to take any action that stifles innovation: the market has moved on considerably since the report and must continue to do so in order to remain fit for purpose and be able adapt to constantly evolving customer needs.”
AMI also attacked the FCA’s underlying suggestion that customers who don’t get the cheapest deal have missed out.
The trade body said: “We are concerned about the pervading focus on price, on which conclusions and remedies have been based.
“It is not acceptable that suitability has not been properly considered… suitability is the foundation of regulated advice.
“Nuanced conversations about customers’ needs and circumstances, evidenced in the actual case files rather than by comparing credit profiles to different individuals, are key to an adviser’s recommendation of a suitable product.”
AMI also said the regulator’s proposed remedies were “disproportionate to the harm identified”.
And it went as far to suggest that the proposals came from the “need to justify the resources that have been dedicated to the study over the last three years”.
Concerns over expansion of execution-only
The FCA also suggested that the need for advice could be slowing parts of the mortgage process and execution-only may be a suitable option for more borrowers.
AMI said it was “inappropriate” for the FCA to make radical changes to advice without sufficient evidence or justification.
The trade body added that the market is already developing solutions to improve the customer journey, which had been “largely ignored” in the report.
AMI added: “There appears to be little consideration of the reasons behind the measures that were taken following the last financial crisis and the rationale for their implementation.
“We do not support any move to grow execution-only at the expense of FCA, Financial Ombudsman Service and Financial Services Compensation Scheme protections.”
Following the publication of higher than expected lending figures in product transfers last week, AMI also suggested the FCA should now examine this part of the mortgage market.
The deadline for responses to the MMS interim report is today.