We’re almost half the way through the year and 2019 certainly has the feeling of being a pivotal year, particularly for the intermediary (mortgage advice) sector, but let’s be honest, also, for the wider world and certainly in terms of the UK’s political and economic landscape.
How Has Financial Regulation Affected The Mortgage Market
Regulation undoubtedly shapes our marketplace – whether it starts off intending to or not – and we’ve seen already this year with the FCA’s Mortgages Market Study Final Report and the subsequent consultation paper on advice changes, that this is likely to be the overwhelming story for the mortgage sector in 2019.
A lot has already been written about the perception that the FCA is attempting to reshape the process in favour of execution-only activity, and there’s clearly a potential threat to advisers if this is truly the raison d’être of the latest consultation.
I, however, prefer to take the line recently outlined by Robert Sinclair, Chief Executive of AMI, that this looks less like a reshaping in favour of execution-only but actually a series of changes designed to reflect how much execution-only business is currently being done. Moving the goalposts to reflect the way the match has been played perhaps.
Reading between the lines of Robert’s recent comments at FSE Manchester – which were pretty scathing of the FCA’s current focus, particularly on price – it seems that, at the time of MMR, the FCA were anticipating execution-only business to be a much smaller part of the market but, since then, that business level has grown and (according to Robert) these anticipated rule changes need to be seen in this context.
Now, of course, I’m not exactly enamoured of the regulator appearing to change its rules to reflect a more execution-only based mortgage market; neither am I keen to see advice rules changed in order to allow more borrowers to secure their mortgage via this means, especially when the FCA itself said that this is likely to result in more borrowers securing less suitable products.
And, we should in no way, step back from the argument that is being made vociferously by many in our industry – that few consumers who conduct execution-only business actually understand what they are signing up to. Indeed, as noted recently, the FCA’s own research publication entitled, ‘Buying a mortgage without advice: How we might help customers understand execution-only disclosures’, itself highlighted how many consumers don’t understand the protections they are giving up by going down the execution-only route.
This is an argument that needs to be made strongly and the adviser community must continue to push the full benefits and protections that come with securing professional mortgage advice. One commentator recently suggested that first-time buyers should not be offered execution-only – putting my thinking cap on and looking at how complex and complicated both the market and individual’s circumstances now are, I can’t actually think of any borrower type who might be better off going down that route.
However, the FCA clearly think there is a strong place for this; that certain borrowers do not need advice and that the industry should be providing technology and tools to ensure these consumers can access mortgages in this way.
Many in the industry might, perhaps quite rightly, baulk at such a view of the mortgage market (and I might agree with them) however the fundamentals of this sector, and the vital role that advice plays in it, should not really change. Execution-only business is ‘written’ now and, while I do not think it should be made easier for consumers to do this, I’m also aware that for many people, the thought of securing their mortgage without advice is simply inconceivable.
It is perhaps up to our industry to push this message, and to convince those consumers/borrowers who might think they can get the best deal by doing it themselves, to look at the advice options available, the wider range of products it can offer, the expertise it can deliver, and the protections it can afford, and urge them to make a very different choice. Mortgage advisers might not be helped by the regulator in this regard, but ‘twas ever thus.
We should continue to move on the front foot, outlining to consumer the opportunities and services mortgage advisers can provide, and the potential difficulties they could be letting themselves in for by going execution-only. Our message is a strong one – let’s make sure it gets heard.
Rob Clifford is a director of Stonebridge Group