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FCA research: Consumers ‘not always aware of consequences’ of execution-only mortgage purchases

  • 28/05/2019
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FCA research: Consumers ‘not always aware of consequences’ of execution-only mortgage purchases
The Financial Conduct Authority (FCA) has published research which shows consumers do not always understand the protections they are losing when they complete mortgages by execution-only.


The research found that execution-only customers generally understood they were selecting their mortgage without receiving advice.

However, it also revealed that customers who went down either application route – execution-only or advised – struggled to understand the disclosure documents that were tested.

“This meant they were not always aware of the consequences of a decision to make an execution-only application, including what protections they would miss out on or what rights they would retain by choosing not to receive regulated advice,” the FCA noted.

Mortgage Solutions understands that despite the research findings, the FCA has no plans to enforce or recommend that lenders and other firms change their disclosure documentation or process.


Excluded customer understanding of protections lost

The regulator conducted the research as part of its consultation to open-up the advice rules to allow more execution-only cases to be completed.

While it referenced the research within the consultation paper, it did not give a full explanation of its findings, excluding the point that consumers did not realise the protections they were losing.

In CP17/19 the regulator said: “In general, consumers did understand that they were buying without advice. However, sometimes consumers thought they were giving up more regulatory protections than they were.

“We hope that firms will find the insights from this research useful in thinking about the way in which they disclose the implications of buying on an execution-only basis.”

It also did not list the risk of consumers potentially giving up protections without realising it in its cost benefit analysis.


Customers don’t understand protections

The research publication, Buying a mortgage without advice: How we might help customers understand execution-only disclosures, highlighted five key issues around the presentation of the disclosure documents and suggested ways in which they could be improved.

The five problems identified related to the process, content and design of the disclosure document being introduced to customers.

They were:

  • The disclosure document ‘gets lost’ among other documents.
  • Customers don’t understand what protections they have.
  • Customers can struggle to understand the disclosure document as it often requires them to interpret technical language.
  • Customers miss or skim over essential information because the design makes the document unappealing or hard to navigate.
  • The disclosure document does not feel important.

A series of potential changes to improve the disclosure document were noted within the research paper which was produced by Revealing Reality.



Heavily criticised

The regulator’s consultation to encourage execution-only purchases has been heavily criticised by the mortgage advice industry.

Association of Mortgage Intermediaries (AMI) chief executive Robert Sinclair said it was a “deceitful document” and that rowing back on the Mortgage Market Review was “dangerous”.

In a contribution for Mortgage Solutions, advice firm and network JLM added that the changes were in danger of leaving consumers “seriously exposed”.

However lender trade body UK Finance welcomed the move while online aggregator Compare the Market said consumers should not be pushed into paying for advice if they did not want it.


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