The mortgage intermediary market has been "too slow" to innovate and increase transparency in the sector, experts have warned.
Speaking at the Westminster Business Forum yesterday (July 10), Andrew Baddeley-Chappell, chair of the Bank of England Residential Property Forum, said the mortgage market had a "powerful intermediary" sector but that work was needed to ensure the consumer could be certain they were getting the best deal.
According to Mr Baddeley-Chappell, the mortgage market was lacking in transparency and lenders and brokers sometimes took advantage of this, which he branded "unacceptable" and "damaging in the long term".
He said: "For years, we've worked towards a market that was as benign and stable as possible. That house prices went up on the same scale as income and lenders who offered the best service would survive — a dull, boring, predictable market.
"In recent times, we appear to be as close to this position as we have ever been. So why do I not feel more comfortable?"
Mr Baddeley-Chappell said both lenders and mortgage brokers were "comfortable with the status quo and its inefficiencies", noting that neither market had shown much ambition for change and that "even the regulator" was disappointed by this lack of purpose.
He said he struggled to think of another consumer market within financial services that had experienced as little movement since the financial crash as the mortgage market.
Specifically, he said the main issue was that customers continued to struggle to operate in the market and their choice was "more complex" than it needed to be.
The Financial Conduct Authority stated in March it was concerned that consumers were "unnecessarily" taking mortgage advice, and that were not getting the best deals despite having been advised.
The regulator plans to consult on changes to its mortgage advice and guidance rules in the next quarter of this year.
Mr Baddeley-Chappel said he hoped technology would help innovation around market access and the ability to compare products, which he highlighted as the key issues facing consumers.
He also noted that a fundamental issue facing the market was the big uncertainty surrounding future interest rates.
He said: "It’s hard for an adviser to compare two-year and five-year fixes when there is such uncertainty over where the interest rate will be in five years time.
"You can’t predict the future - but more could be done to increase transparency around this."
Speaking on a panel at the same event, Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said that brokers were the "oil that makes [the mortgage market] work".
He said: "They help the consumer work and the market roll. But, we will see some sort of innovation and automation."
Mr Sinclair also pointed out that innovation — such as tech changes and data use — would vary across the broker market, depending on whether it was a big broker firm or a one-man band.
He thought the market was showing a good pace of change but would need "perhaps a year or two" to get up to pace, stressing that market entrants such as Habito and Trussle had put pressure on the market to innovate faster.
But Julie Patient, counsel at law firm Hogan Lovells, warned that innovation could be "hit and miss" and that firms needed to have an action plan to protect consumers from any misses.
Speaking on the same panel as Mr Sinclair, Ms Patient said: "Innovation naturally involves an element of hit and miss - some works, some doesn’t. So, how do you protect a consumer when it doesn’t work?"
She said firms that had an innovative product that attracts people needed to have a "exit route" if it failed and stressed that the market needed to learn its lesson from the noughties and the credit crunch, "especially when it comes to access to market and improving switching".
She added: "We need to be careful of a repeat of the noughties where unnecessary churn was pushed to improve profit."
imogen.tew@ft.com
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