The Financial Conduct Authority has revealed plans to investigate whether rules introduced by the Mortgage Market Review favoured certain types of mortgage distribution.
In a feedback statement published today (12 December), the FCA revealed the industry had called for it to examine the impact of current rules on the level of intermediation in the sector.
The regulator confirmed it would examine whether the rules introduced as part of the Mortgage Market Review had favoured some forms of distribution over another “and whether this is in the interest of consumers.”
The MMR, which required a greater amount of affordability checks being made on those seeking to obtain a home loan, led to many building societies no longer advising on mortgages.
The FCA’s feedback paper said: “As a regulator, we are keen to ensure that our rules work towards maximising the benefits that consumers can get from information or advice.
“We are, therefore, interested in whether, for example, the regulatory framework favours some distribution or business models to the detriment of others, and whether that is ultimately to the benefit of consumers.
“The FCA remains distribution-channel neutral, but we will take the opportunity in the market study to look at changes in distribution since the Mortgage Market Review, including assessing whether our rules have affected firms’ ability and incentives to innovate, and whether they have led to outcomes that are in the best interests of consumers.
“We are particularly interested in understanding whether consumer outcomes differ depending on the distribution channel they use and on whether or not they use advice.”
The regulator also revealed it would explore at each stage of the consumer journey and whether the available tools (including advice) help mortgage consumers make effective decisions.
It will also explore whether commercial arrangements between lenders, brokers and other players lead to conflicts of interest or misaligned incentives to the detriment of consumers.
The regulator’s work will focus on first charge residential mortgages and cover each stage of the consumer journey.
Barriers to consumers making a decision, across the lifecycle of the mortgage (such as house purchase, remortgage, switching) will also be looked into by the FCA.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said the MMR did lead to some lenders no longer selling their own home loans but he questioned if that was a bad thing.
He said: “The focus of the MMR was to encourage greater levels of details being acquired by advisers and lenders about borrowers. This led many to go down the advised route.
“I would say that it is a good outcome that if you, as a business, could not make it commercially viable to collect this greater amount of information that you left the advised side of the business.”
As with the Financial Advice Market Review, the regulator’s latest probe will explore whether there are opportunities for better technological solutions to any problems identified in the sector.