The Financial Conduct Authority (FCA) has today launched a market study to consider whether competition in the mortgage sector can be improved to benefit consumers.
The FCA wants to understand whether consumers are empowered to choose on an informed basis between products and services and are in a position to understand whether these represent good value for money.
The market study will explore two questions:
- At each stage of the consumer journey, do the available tools (including advice) help mortgage consumers make effective decisions?
- Do commercial arrangements between lenders, brokers and other players lead to conflicts of interest or misaligned incentives to the detriment of consumers?
The FCA announced the study and its focus in May, having gathered feedback on competition in the mortgage sector. During the study, the FCA will be engaging with a wide range of market participants about their experiences. In a terms of reference document published today, the FCA provides further detail on the scope and procedures of the market study.
Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said: “As a mortgage is likely to be the biggest financial commitment most people make in their lifetime, we’re keen to ensure that competition in the mortgage sector is healthy and working to the benefit of consumers.”
The FCA aims to publish an interim report in summer 2017, setting out our analysis and preliminary conclusions. This will provide stakeholders with an opportunity to comment prior to publishing our final report in early 2018.
The FCA will also review whether there are opportunities for better technological solutions to problems we identify, including greater use of digital channels to deliver information or advice.
- Read the Terms of Reference
- The FCA published a Call for Input (CfI) on competition in the mortgage sector in October 2015 seeking views on any areas of the mortgage sector which might raise competition concerns meriting further investigation. The FCA published the feedback statement in May 2016 outlining the main areas of interest arising from the CfI, and announcing its intention to conduct a market study.
- Commercial mortgages, second charge and buy-to-let mortgages are not the focus of this study but the FCA will take into consideration any insights gained through the market study
- When referring to ‘tools’, the FCA means any sources of help a consumer may use when shopping around or choosing a product such as information on products provided directly by lenders, price comparison websites (PCWs) or best buy tables, mortgage calculators, as well as advice (whether provided by a lender or a broker).
- If the FCA conclude that competition is not working well they have a number of powers at their disposal to propose and/or implement remedies (for instance, publishing guidance; making proposals for enhanced industry self-governance; taking supervisory or enforcement action; reviewing the relevant elements of the regulatory framework which could include making new or amending existing rules as well as removing regulatory barriers). If required, the proposed remedy would be subject to consultation.