FSA: Product type ‘a determining factor’

David French

April 5, 2008

As part of the second phase of its Mortgage Effectiveness Review, the regulator studied consumer experiences within the non-conforming and lifetime mortgage sectors and whether they were obtaining suitable products.

One of the key factors it recorded was that while lifetime mortgage consumers did the shopping around themselves, non-conforming consumers were much more reliant on the intermediary to do the shopping around for them.

It also found that all consumers assumed that brokers would recommend appropriate options, or at least not suggest inappropriate ones.

It also found that lifetime mortgage consumers believed that they had a good understanding of the risks and features of the mortgages from their own research, while non-conforming consumers focused on the cost of the mortgage and relied on risk and feature information from their broker.

However, while consumers in both areas found the Key Facts Illustration a useful document to check details, most did not use it to shop around and make product comparisons.

Dan Waters, director of retail policy and themes at the FSA, said: “The Mortgage Effectiveness Review is an integral part of the FSA’s programme of work on mortgages and will help shape the future of our mortgage conduct of business regime.

“It sits alongside our thematic work and close supervision of individual firms, and forms part of the balanced and proportionate approach we are taking to ensure the fair treatment of consumers.”

Commenting on the findings, Dominic Fraser-Smith, group product manager at Norwich Union Post-Retirement Products, commented: “Our own experience shows us that consumers are indeed generally very well informed about lifetime mortgages before they make the decision to purchase them.”

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