The chief executive of the Association of Mortgage Intermediaries has branded the Financial Conduct Authority’s recently proposed changes to mortgage advice rules as "deceitful" and "dangerous".
In its consultation paper on mortgage advice and selling standards published last week (May 7), the FCA stated it wanted to help facilitate execution-only routes by changing the way it categorised advice and the point at which consumer must be led down an advice route.
In the paper, the watchdog proposed to change its guidance to indicate that a tool which allows a consumer to search and filter based on objective factors, such as interest-rate type and term, was not necessarily giving advice.
The FCA also stated the "interaction trigger" — which required regulated mortgage advice to be given at every face to face mortgage sale — would now exclude interactions that are unconnected to regulated advice, including support with an application or ongoing case management.
But speaking at the Financial Services Expo in Manchester yesterday (May 15), Robert Sinclair, Ami’s chief executive, described the regulator’s latest paper as "one of the most deceitful documents [from the FCA] in some time".
He also said the FCA’s attempt to make execution-only business easier was "dangerous" and that the regulator was trying to row back on the rules introduced as part of the Mortgage Market Review in 2014.
the MMR introduced a requirement which stipulated regulated mortgage advice should be given at every face to face mortgage sale but in an occasional paper published last May, the FCA stated this had led to consumers increasingly turning to intermediaries instead of approaching a lender directly.
In March the watchdog said it was concerned consumers were being "unnecessarily channeled" into advice and said its rules on advice could have been a barrier to the development of tools that help consumers choose and buy a mortgage.
Mr Sinclair said: "The MMR was supposed to make execution-only difficult. To say now, because they have an unfortunate lapse of corporate memory, that this is not what they meant is untrue. They meant it and there was a good reason for doing it."
He also noted that the market was in a different place now to what was intended post-MMR and accused the FCA’s paper of being "an attempt to legitimise what has been done as opposed to actually going back and sorting the problem".
He added: "[The FCA] wants to make it easier to do execution-only and they want to legitimise it so lenders can offer a product on execution-only which is cheaper than on an advised rate. I think that is dangerous."
Mr Sinclair went on to say that part of the problem was that the FCA was approaching the issues having dealt with a benign market for the past decade where nothing had gone wrong.
He said: "When we hit the next crash, as there has to be, all of this will go to hell in a handcart.
"So I will be fighting quite hard to make sure that none of this happens. However, unless the other lender trade bodies fall behind us on this I think it will be hard to push back against all of it."
Some advisers have also accused the FCA of doing a ‘complete 180’ and a ‘u-turn’ regarding its stance on mortgage advice.
Responding to the advisers' criticism, an FCA spokesperson said the regulator was willing to allow the market, be it brokers, intermediaries or lenders direct, to refer customers in a way which allows them to exercise their choice.
The spokesperson said: "We remain vigilant about advice and the need for advice but that should not be at the expense of innovation for consumers who have the ability and the knowledge to execute themselves or be advised by a broker.
"If our rules are pushing people into unnecessary advice or acting as a barrier to innovation that is something we need to think about."
The FCA's consultation on potential changes to mortgage regulation is expected to be published in the final quarter of this year.
imogen.tew@ft.com
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