In a response to the regulator’s recent call for input – and possible thematic review – on competition in the mortgage industry, the CML’s communications manager Bernard Clarke stated to promote greater competition in the future the market would now benefit from a period of stability, without any significant regulatory intervention for a while.
He said: “Indeed, there might be a case for modest de-regulation in some areas – or at least clarification of the rules by the FCA – to encourage more competition in the market.”
Reiterating comments made last month by CML director general Paul Smee, Mr Clarke added: “We believe that the regulator could provide greater clarity where firms may feel that they are taking a risk if they opt for a liberal interpretation of the rules.”
In particular, the CML suggested it might be helpful for the regulator to make clear it will not take an unnecessarily severe approach – either now or retrospectively – with firms over the interpretation of rules for assessing affordability for borrowers whose mortgages extend into retirement.
“The same could apply to rules covering mortgage sales and advice, which currently appear to discourage some firms from dealing with online and digital applications from customers,” wrote Mr Clarke.
“If that is indeed what is happening, it is at odds with what the FCA has said about encouraging mortgage market innovation and the use of modern channels of communication.”
In setting out its reasons for considering a review, the FCA highlighted some market features that might give rise to concern.
It is keen to explore, for example, whether competition extends to all segments of the market and delivers a good outcome for all groups of consumers.
It also raised questions about how competition might be affected by economic changes over time, and in particular as the market adjusts to higher interest rates.
The FCA also said it should consider the effects on competition of its wider mortgage market programme, including the recently completed look at mortgage advice and distribution.
Mr Clarke said the CML agrees with this approach, accepting that by diverting resources to dealing with so much regulatory change in recent years, lenders may have diverted some resources away from innovation that might have delivered market benefits for consumers.
“As the pendulum has swung over a number of years from a more liberal regime to a tougher one, has there been a tendency to stifle, rather than stimulate, market competition?” he asked.
The FCA is now analysing the responses to its call for inputs, with a feedback statement due in March giving more details of any review, including its timing and scope.
Should it decide to go ahead, the CML expects interim findings in the second half of this year and a final report in the first half of 2017.
“While we accept that there may be a case for a review, mortgage provision in the UK already displays many features associated with a highly efficient and competitive market,” commented Mr Clarke, adding that there are more than 100 active firms in the market, consumers have a wide choice of products and borrowing costs are at an historic low point.
Victor Jannels, group executive chairman of Atom, said the CML is close to the ‘coal face’ and agreed it might be a good thing if the regulator were to heed their advice and enter into a period of reflection.
He added: “Perhaps at the same time recognising what may, or may not, have been of real value to the mortgage customer.”
peter.walker@ft.com
