Financial Conduct Authority  

FCA dismisses price concerns in new mortgage advice rules

FCA dismisses price concerns in new mortgage advice rules

The Financial Conduct Authority has dismissed concerns its new mortgage rules could see advisers become too focused on price at the expense of suitability. 

On Friday (January 31) the watchdog​​​​​​ published its final rules on amendments to the mortgage advice market, a sector which has found itself under increased regulatory scrutiny since the FCA's Mortgage Market Study flagged too many consumers were overpaying for their mortgages. 

Last year the regulator consulted on proposals requiring advisers to explain and record why a client was not recommended a cheaper mortgage, with these rules finally coming into force last week.

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According to the FCA some respondents to its consultation had raised concerns the changes could see advisers focus on price when recommending a mortgage, rather than suitability.

But the regulator dismissed these concerns, stating: "We don’t agree that this change will make advisers focus on price as opposed to suitability.

"Advisers must first consider the needs and circumstances of the customer and base their recommendation on suitability.

"It is only if there are other mortgages with the same features that are cheaper that the adviser will need to explain to the customer why they have not recommended the cheaper mortgages."

The regulator said it hoped the latest rules would allow more consumers to understand how pricing works in the mortgage market, and give them the opportunity to challenge an adviser's recommendation if necessary.  

The Mortgage Market Study, published last year, found about 30 per cent of consumers could have found an identical or better mortgage at a cheaper rate and receiving advice did not make a difference to the likelihood they overpaid.

In last week's policy statement the FCA said "relatively few" complaints were made against mortgage advice in the UK, a pattern it expects to largely stay the same under the new rules. 

The regulator confirmed it had received fewer than 8,000 complaints in the first half of 2019 about the advising, selling and arranging of home finance.

The FCA confirmed it may carry out further research and supervision to assess the impact of its changes.

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