Posted: 31st May 2016

“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.”

(FCA director of Strategy and Competition, Christopher Woolard)


The FCA has published its feedback statement in relation to its investigation into competition in the mortgage sector. The FCA’s feedback statement follows on from its Call for Inputs (CfI) from October 2015.

The feedback statement confirms that the FCA has concluded that lenders could further improve consumers' ability to make better choices about mortgage deals.

More widely, the FCA has been investigating how mortgage firms have implemented new lending rules, which require tougher checks by lenders on the ability of borrowers to pay back a loan. As part of its Responsible Lending Review, the FCA said that responsible lending rules have been consistently applied. The regulator has urged firms to continue developing a range of products that can meet the needs of older consumers who represent an increasing proportion of the British population.

Key points from FS16/3

Intermediated mortgage market

Based on the findings, the regulator has said it wants to explore further how the intermediated market works for consumers.

Specifically, it will look at whether available tools designed to help consumers make choices – such as advice – meet their needs, and how intermediation changed after the Mortgage Market Review (MMR). It will inspect how products are being sold and assess whether there are any distortions in the market because of a focus on particular headline charges or features.

The FCA has also said it will specifically examine the impact of commercial arrangements between lenders and brokers, such as panels, to see if there is a potential for conflicts of interest or misaligned incentives.

Vulnerable customers and consumer segmentation

The regulator added it had found “no evidence” that the new lending rules had prevented lenders from underwriting mortgages for more vulnerable people, including older borrowers and those who are self-employed.

The market study will however look at specific consumer segments with less common needs and how technology can help to serve this market. Parts of the work will look at the regulator's own rules determining whether some of its own framework could have a negative impact on competition.

Key areas of FCA concern

  • Consumers face challenges in making effective choices, particularly when it comes to assessing and acting on information about mortgage products, with intermediaries being key to the process
  • There are opportunities to make more effective use of technology in the provision of information and advice
  • Commercial relationships between different players in the sector’s supply chain – in particular the use of panels – might give rise to competition concerns
  • Certain dimensions of the regulatory framework might have a negative impact on competition

Regulatory next steps

The FCA will undertake a targeted market study focused on consumers’ ability to make effective choices, together with three smaller pieces of follow-up work relating to the themes emerging from the CfI which are:

Contributing to the next phase of the Council of Mortgage Lenders (CML) and Which? work on the transparency of mortgage fees and charges, with the aim of ensuring that relevant concerns raised by stakeholders during the CfI are appropriately taken into account
Acting on specific aspects of the FCA’s current regulatory regime where there is a case for change to improve competition
Working with industry to increase competition law awareness in the sector

The market study will launch in Q4 of 2016 with results due in 2017.

Key Questions for Firms

Firms thinking about how to best tackle the issues should examine their approach (and the general approach of the industry) to establish opportunities to improve both their

  • Do the available tools for helping consumers make choices (such as price comparison websites, best-buy tables, advice etc.) effectively meet their needs? Are there any distortions because of undue focus on particular headline charges or features?
  • Can your firm provide for specific consumer segments with less common needs/circumstances? (for instance, those without online access, those with greater levels of experience and understanding who have lesser advice needs, older borrowers needing advice across a wider product range)
  • Are there opportunities in your organisation for better technological solutions?
  • What is the impact of increased intermediation in the mortgage sector on the consumer outcomes delivered by your firm? How has the Mortgage Market Review changed the market in terms of intermediation?
  • Are there differences in the outcomes for those consumers who obtain their mortgages through mortgage brokers when compared with those who go direct to lenders?
  • If so, what drives those differences and is there room for improvement for parties on either side?
  • What is the impact of panel and other commercial arrangements between lenders, brokers and other players in the mortgage supply chain? Is there potential for conflicts of interest or misaligned incentives?
  • Do any such arrangements create barriers to entry or expansion resulting in less consumer choice?

Huntswood will keep a keen eye on this sector in order to bring you any regulatory developments which may impact your firm.

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