Mortgage advice rule overhaul to hit second charges

The regulator acknowledged that the work which originated its changes was conducted on the first charge sector for its Mortgages Market Study (MMS).

However, in its CP19/17 consultation paper published today, the regulator said these changes would also map across for second charge loans.

“The proposals in this CP also apply to second charge mortgages, though they may be less relevant as these mortgages are frequently used for debt consolidation where advice is required,” the FCA said.

Once enacted, advisers will be compelled to explain to customers and record why they have not recommended a cheaper product which is suitable for their needs.

The changes also focus on making it easier for online and execution-only business model to operate in the mortgage market, in a bid to increase consumer choice.

It follows findings in the MMS that consumers maybe being channelled “unnecessarily into advice”, but that any harm from this “does not appear to be large”.

It found that 30 per cent of cases it sampled could have received a cheaper equally suitable product than the one which was recommended.