Financial Conduct Authority  

FCA to change mortgage advice rules

To further assist the execution-only market, the FCA proposed to remove barriers that currently make execution-only sales inaccessible.

These include removing ‘prescriptive detail’ rules — which require a lot of detail to be included in a firm’s policy on execution-only sales — and clarifying that firms can actively market their execution-only channels and show different prices between execution-only and advised policies.

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Christopher Woolard, executive director of strategy and competition at the FCA, said: "The mortgage market is working well for most customers but we have identified some areas where our rules are acting as a barrier to innovation. 

"The changes we’ve announced today will allow firms to develop products and services which can truly meet the needs of customers."

Responding to the proposals, UK Finance director of mortgages, Jackie Bennett, said they provided helpful clarity on the boundary between execution-only sales channels and mortgage advice.

She added: "This should help ensure that firms can easily provide factual information to borrowers who opt to go through the execution-only route, helping them to choose or switch product quickly and efficiently. It will also support continued innovation, particularly in digital channels."

Nicholas Morrey, product technical manager at John Charcol, said most intermediaries had already been looking at price as a main factor but stressed that full advice and recommendation meant considering factors such as flexibility, speed of processing and forward planning. 

He said: "Any one of those points can lead to a recommendation that is not the cheapest option."

But Mr Morrey said the bigger change was when a transaction is conducted under ‘full advice and recommendation’ and said the FCA seemed to be paving the way for ‘informed choice’ and execution only.

He added: "Intermediaries are likely to welcome change in this area to improve the journey for applicants who are better informed as to their own needs and whose situations are fairly straightforward enabling the swift placement of their mortgage – often based only on cost.  

"But we would not want to see this relaxed too far to prevent some consumers requesting a lower level of advice and leaving the intermediary in a position where key requirements are not uncovered as that could lead to an inferior product being applied for to the consumer’s potential detriment."