The Association of Mortgage Intermediaries and the Building Societies Association have accused the FCA of unduly focusing on price in its interim report into the mortgage market.
The interim report was published in May and the trade bodies have now replied directly to questions leveled by the regulator following the report.
Both associations argue that the report focused too heavily on price, echoing Ami chief executive Robert Sinclair’s thoughts made in Mortgage Strategy over the last few months.
“Price is important, but there are a range of other factors, including speed and quality of service that are important too,” the BSA writes in its response.
While Ami says that: “It is not acceptable that suitability has not been properly considered.”
In fact, the FCA report states that in 79 per cent of transactions the cheapest product is recommended.
Ami says this is “baffling” that this level “is not considered an adequate outcome.”
“The only winners in a price driven, commoditised market would be those lenders with the deepest pockets. Effectively competition, innovation and much needed specialist mortgage products would be eroded,” concludes the BSA.
A “narrow view of the role of advice,” as Ami puts it, is also a concern. It takes issue with the report’s conclusion that in some cases a customer who did receive advice would have ended up with the same product if they had not spoken to an adviser, branding this “dangerous to assume”.
Another criticism is the relevance of the review considering the time span that its research covers (2015 and 2016), especially in the context of encouraging innovation, which the FCA has proposed to do via amending rules of defining advice. BSA head of mortgage and housing policy Paul Broadhead says: “the market has moved on considerably since the report and must continue to do so in order to remain fit for purpose and be able adapt to constantly evolving customer needs.”
“The progress made by the industry and by new fintech entrants in the last year is largely ignored,” says Ami, and adds that: “we are strongly against any proposal to change the definition of advice.”
Furthermore, Ami is critical of the FCA’s understanding of the mortgage market in its response to a series of questions. It mentions that, “the FCA study team does not appear to have a clear understanding of the difference between a panel and a mortgage club,” that, “the findings do not appear to take into account the vast difference in regional lending choice such as across Northern Ireland compared to mainland UK,” as well as declaring that, “the limitations of using Moneyfacts as the sole source of mortgage products have not been recognised.”
“Notwithstanding the above and our responses,” concludes the Ami response, “[Ami] remains fully committed to working with the FA, industry and other trade bodies to debate this study, agree the appropriate remedies and actions and deliver the agreed changes to the market to improve the outcomes for all consumers.”