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CMA starts mortgage price-capping investigation after super-complaint

  • 28/09/2018
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In a super-complaint received by the Competition and Markets Authority (CMA) today, Citizens Advice suggests ‘price capping’ could reduce the ‘customer-loyalty’ detriment in the fixed rate mortgage market.


The super-complaint from Citizens Advice said: “Deep, structural price discrimination against disengaged and loyal consumers has been a persistent feature of essential markets for many years. After careful consideration, we have reached the view that the scale of this problem justifies a super-complaint, the first time we have taken such action in seven years.”

The CMA has already resolved to investigate the super-complaint targeting five sectors alongside mortgages, including savings, broadband, mobile and home insurance and report back within 90 days.

The 76-page super-complaint revealed that of the five sectors, mortgage customers are the least likely to suffer with 10% penalised for loyalty against 47% of home insurance or 43% of broadband customers.

However, of the average household spend of £3,671 a year on the five services, the mortgage and protection spend is the highest at £2,527, research revealed.

Possible outcomes of a CMA investigation include making recommendations to government to change regulation, action by sectoral regulators, taking enforcement action, launching a further market study or deciding no action is required.


Fixing prices or price fixation?

However, focus on price alone, potentially through an execution-only route, rather than overall suitability for the consumer, remains a contentious issue for the industry.

In May, the Financial Conduct Authority’s Mortgages Market Study (MMS) also suggested that 800,000 consumers would have benefited from switching products, saving an average of £83 a month.

It recommended a series of improvements to the current direct and intermediary sales processes to help consumers shop around or offer digital product search tools to make product searches quicker and easier.

However, the regulator’s focus on price ignores the fact suitability for the consumer includes a raft of factors, including best price and was savaged by the Building Societies Association and the Association of Mortgage Intermediaries (AMI).

Speaking at the time, Mortgage broker trade body AMI said: “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”.

In September, AMI confirmed it is working with the regulator to implement its adviser rating website a comparison tool to help consumers easily find a suitable mortgage broker.

Read today’s super-complaint in full.

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