The FCA has raised concerns that commercial deals along the mortgage supply chain and the dominance of networks pose a risk to competition in the mortgage market.
The regulator has published two reports today on whether the mortgage market is working effectively for borrowers.
In the first report, the FCA says following the Mortgage Market Review lenders have engaged with the aim of responsible lending rules. It adds it did not see evidence the MMR had prevented responsible lending decisions to groups such as older borrowers or the self-employed, but said it would return to the issue of older borrowers in a wider piece of work.
But in the second report, the regulator says it has identified concerns about competition in the mortgage marketwhich warrant further investigation. The feedback statement has been published following a call for input from the industry in October.
The FCA says the main themes from the feedback were:
- Consumers face challenges in making effective choices, particularly when it comes to assessing and acting on information about mortgage products, with intermediaries being key to the process
- There are opportunities to make more effective use of technology in the provision of information and advice
- Commercial relationships between different players in the sector’s supply chain – in particular the use of panels – might give rise to competition concerns
- Certain dimensions of the regulatory framework might have a negative impact on competition.
In particular, the FCA says industry respondents raised concerns about the commercial deals prevalent in the mortgage sector, for example where borrowers are led to believe they have to see an estate agent’s in-house broker in order to view or offer on a property.
Respondents also want to see safeguards in place for borrowers where one group of companies is referring to their own brokers, conveyancers or surveyors.
Concerns were also raised about the close relationships some developers have with particular brokers, which leads to business being placed with a small number of lenders who can turn around mortgage offers within tight timescales.
The FCA also heard concerns about how network panels could be skewing the market.
Smaller lenders say they feel pressurised to accept the terms on offer from large broker networks, and noted the networks’ “significant influence” in controlling access to lenders’ products.
Brokers, meanwhile, argued smaller firms can struggle to access the best deals from certain lenders.
Concerns were also raised that panel criteria is not always transparent, so lenders can find it difficult to expand if they do not know why they were not included on certain panels.
The regulator has decided to carry out a “targeted market study” to address the overall concerns raised about mortgage market competition.
The terms of reference for the study will be issued before the end of the year.