The Financial Conduct Authority (FCA) has published its annual ‘Sector Views’ document, which highlights its areas of concern in the financial services markets.
The report found that the FCA had seen numerous positive corrections in the credit market.
The regulatory body’s ‘Financial Lives’ data shows that 7.4 million adults in the UK are over-indebted and find their financial commitments a “burden”.
The document also noted that pricing practices in insurance still penalises loyal customers.
The FCA report also shows that “30% of consumers pay £550 per year more than the cheapest like-for-like alternative during the initial period of a ‘fixed’ rate mortgage.”
Mojo Mortgages says that this is a problem it is “passionate about solving”.
The firm adds that its “ultimate aim is to reduce the number of consumers overpaying”.
The number of borrowers who are choosing 5-year fixed rate products over 2-year deals has increased, the body said.
The report shows that this has affected activity across the financial services market.
Despite this, the quantity of firms in the market rose by 30% between 2008 and 2018, rising from 128 to 167.
Turning to Help to Buy borrowers, the FCA believes consumers who have purchased a property through the scheme are more likely to face negative equity if property prices decline.
Data collected by the FCA outlined that the ‘loyal penalty’ cost six million customers an extra £1.2bn in 2018.
High-risk retail investment products are exposing consumers to more risk than they can absorb, according to the body.
Furthermore, the paper highlighted that new payment firms have been able to enter the market and expand, however, a number of the said firm’s products do not have protection in place for consumers.
Within the report, the regulatory body said that it expects to see an increased number of firms exiting the lending market in the “near to medium-term” future.
Christopher Woolard, executive director of strategy and competition and interim chief executive designate at the FCA, said: “We are committed to reducing harm in the markets we regulate.
“Our analysis of markets ensures that we do this effectively, helping us to decide where to focus our attention.
“We expect firms to be similarly focused on preventing harm and assisting us where they can, and we will continue to actively supervise all firms to ensure they achieve this.
“What is clearly apparent from the ‘Sector Views’, is that many of the harms we are seeing are created by a significant number of smaller firms we regulate or firms beyond our remit.
“The findings in the report will contribute to our upcoming Business Plan and the decisions we make affecting consumers, market integrity and competition.”