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Direct deals are only 17% of market, says FSA


Direct-only mortgages represent just 17% of the market, the regulator revealed last week.

In its Mortgage Market Review distribution and disclosure consultation paper, the Financial Services Authority claims that the number of direct-only products has reduced considerably – from 26% in November 2009 to 17% in November 2010.

Its figures show consumer loyalties are evenly split, with 50% going direct and 50% through a broker in Q2 2010.

But in a bid to encourage more brokers to recommend direct-only deals it is proposing that they do not need to issue a Key Facts Illustration on them. It wants to encourage firms to consider whether direct deals might be the best offering for their clients.

In the paper the FSA says: “The current rules get in the way of this because firms must provide a KFI when proposing a product and are liable for its accuracy.

“So we propose that where a firm other than the lender puts forward or recommends a direct deal, they will not be required to provide a KFI.

“Instead, the firm will be required to keep a record if they recommend a direct-only deal and provide the consumer with a copy of it in a durable medium.”

It adds that if a firm wants to call itself independent it will be required to tell consumers explicitly whether it will consider direct-only deals.
The FSA also suggests that where fees are rolled up two KFIs may need to be issued.

It has ruled out a ban on the roll-up of fees and charges as this would not be in the interest of consumers.

David Geale, acting sector leader for retail intermediaries and mort-gages at the FSA, says he does not have a timescale for implementing the proposals and does not want to rush matters.

He adds: “I don’t see anything in the paper that will necessarily lead to a reduction in the number of mortgage brokers. They have a strong role to play and this will continue.”



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  • Tim 26th November 2010 at 1:44 pm

    The FSA states that it’s figures show consumer loyalties are evenly split, with 50% going direct and 50% through a broker in Q2 2010.
    How can they know this? They can’t tell if a broker has recommended a direct deal.If I’ve recommended a direct deal the FSA do not know that I’ve recommended it, they only know the client has taken a direct deal, not who recommended it. When a client applies online for a direct deal and completes their “how did you hear about us?” section, conveniently there is no option to select stating “my broker recommended it”
    The worrying thing is that the FSA then state that they are acting on their obviously flawed data. No suprises there then.