It seems somewhat churlish to add to the chorus of disapproval that appears to have greeted the FCA’s Mortgages Market Study Final Report but, away from the obviously necessary changes required in the ‘mortgage prisoner’ space, I’m finding very little support for the contents of the document, and some notable commentators have already questioned why the regulator appears to be attempting to make a hasty retreat from its own MMR.
First, let’s start with that positive. The consultation paper on the proposed changes to lenders’ responsible lending rules and guidance, which I’m sure we all hope will result in those many thousands of borrowers currently unable to move mortgage, through no fault of their own, being able to do so. The industry has already gone part of the way to enabling this but it was always likely to require a regulatory push and therefore I’m pleased to see this eventually happening.
Add this to how it might also help those borrowers who could switch but, for whatever reason, choose not to do so, and I think we could be opening up a significant market particularly for mortgage advisers who (ordinarily) would be best placed to deliver these borrowers into the lenders/products they should be accessing, resulting in significant savings for them.
I say ‘ordinarily’ because it’s clear from the Final Report – and indeed last year’s Interim Report – that advice or mortgage advisers are hardly flavour of the month at the regulator’s offices in Westfield. As has been made clear by many who’ve analysed the report, this appears to be a regulator unconvinced of the benefits of advice, or the protection it affords, and seems far more driven to try and deliver online tools that would facilitate far more execution-only business. How many of us would have believed this in a post-MMR environment?
Away from this, one of the areas that has intrigued me ever since the Interim Report, is that of the intermediary firm comparison tool/directory that the FCA seem very keen on introducing. Despite – once again – heavy criticism of this last year, the FCA again seem intent on not listening to the industry and attempting to deliver a comparison tool where consumers can actively play intermediaries off against each other.
The problem, which has been covered many times before, is that we’re all still unclear on the data it plans to use to deliver such a comparison – in the Final Report it talks about access to lenders, fees, what channels firms allow consumers to access them through, but does any of this lend itself to a ‘league table’ approach to ranking intermediary firms? I’m still of the opinion that this is open to abuse, that firms could massage their data to appear at the top of lists, and that this would be very damaging to small firms who might feel they’re unable to compete with the bigger operators. And this is an industry which has a lot of small firms.
From the Final Report, I get the sense that the FCA feel the same way but can’t quite admit it. Since the Interim Report was published, this idea has been debated amongst a working group of industry stakeholders and, over the course of the last 12 months, they have come up with no tangible information or way forward on how this work, preferring now to push this over to the Single Financial Guidance Body (SFGB) who will include mortgage advisers alongside its retirement adviser directory which is part of the Money Advice Service (MAS) brand.
Here’s the real doozy in all of this? Despite talking about this for 10 months, the SFGB will now consult during Quarter two and three about the data this comparison table should include. So, in effect the FCA has passed the buck to another organisation to sort it out, having got nowhere itself. Plus – and this seems priceless as well – inclusion in this new directory will be on an entirely voluntary basis, so consumers who use it will not even get a full comparison of all firms anyway.
And, this is in an environment where a number of commercially-run directories/listing sites already exist. I look forward to hearing from Unbiased, and the like, around how the FCA/SFGB proposes to ensure they are not ‘unduly disadvantaged’ – how can they possibly deliver on this when they’ll be orchestrating a regulator-led alternative/competitor to them and using Government money no doubt to promote it? I sense a number of lawsuits in the offering and some rather large payouts forthcoming.
This, as mentioned, is just one area where the Final Report misjudges the market, misjudges the consumer, misjudges the advisory sector, and misjudges the positive impact of its own Mortgage Market Review, which has done so much to improve the provision and quality of advice to consumers and thus improve the protection they get.
You might not think I would say this, but we need to hear more from the regulator on the Final Report. The market needs an explanation.
Richard Adams is Managing Director of Stonebridge Group