The presence of aggregators and price comparison websites in the mortgage market has grown over recent years.
These sites are now visited by increasing numbers of consumers who use them to identify what mortgage products may be available to them before being redirected to lenders’ websites to complete their purchase.
It is important to consider how this popular distribution channel will be affected by the Financial Services Authority’s Mortgage Market Review rules.
At present, the majority of aggregators and comparison sites operate as introducers to non-advised sales distributors. The MMR highlights a concern held by the regulator that operators in this market may not be aware that they are providing a service which goes beyond merely introducing consumers to authorised firms and that their services extend to the provision of advice.
Aggregators and comparison sites are reminded to consider this matter carefully, look to previously issued guidance aimed at the insurance comparison market and apply it in the context of their mortgage activity.
Now is the time for these firms to review their activities to ensure they are appropriately authorised or otherwise exempt.
By way of example, if the aggregator or comparison site asks a consumer questions which have the potential to steer them to a particular product or product feature, it is likely that the site will be seen to be providing advice, even if all it does at the end of this filtering process is pass the consumer to an identified lender.
“The consequences could be serious for firms operating an advice service without the correct permissions
The consequences could be serious for firms that are inadvertently operating an advice service without the correct FSA permissions, as they will have to cease trading until they have sought a variation from the FSA – not an overnight exercise.
The firm will also have to raise the breach with the regulator first, of course. Introducer comparison sites operating with the correct permissions will still have to seek new permissions eventually since the MMR proposes to remove the non-advised sale route.
This means aggregators and comparison sites will have to assess whether a mortgage is appropriate based on the consumers’ needs and circumstances for all sales.
This will be a costly and time-consuming exercise, and may mean that aggregators and comparison websites drop out of the market.
This highlights a risk that the MMR’s requirements, when combined with a more robust approach to supervision, could deter some innovation and competition in the marketplace.
So this sector has wholesale reviews and decisions to make on how the changing face of regulation will influence the type of service they provide to consumers and their future relationships with lenders.
Those sites that get their strategy right now will lead the comparison market for years to come.