Two trade bodies have taken a swipe at the Financial Conduct Authority’s Mortgages Market Study interim report for focusing too much on price.
The Association of Mortgage Intermediaries and the Building Societies Association were both critical of the May report, which suggested that some customers are missing out on the best rates – whether they see an adviser or not.
AMI said: “We are concerned about the pervading focus on price, on which conclusions and remedies have been based.
“In this case “needs” has been interpreted to mean “cheapest product”.
“It is even more baffling that despite finding that intermediaries recommend the cheapest product available to them in 79% of transactions, indicating a significant proportion of customers are obtaining both a suitable and well-priced mortgage, this is not considered an adequate outcome.”
What is more the BSA said: “There is a theme throughout the paper, which suggests that price is the most important or only factor when choosing a mortgage is disappointing.
“Price is important, but there are a range of other factors, including speed and quality of service that are important too.
“The only winners in a price driven, commoditised market would be those lenders with the deepest pockets.”
It went on to say that competition, innovation and much-needed specialist mortgage products would be eroded. Currently, it added, building societies provide real competition in the market by offering niche mortgages alongside standard products.
A relaxation of advice
AMI also took issue with the regulator’s suggestion that some customers “are capable of picking a well-priced mortgage product on their own; a relaxation of the requirement to receive advice may better meet their needs”.
The trade body added: “We do not agree that redefining advice in this way will deliver better balanced outcomes for the majority.
“It is dangerous to assume that a customer who did receive advice would have ended up with the same product if they had not spoken to an adviser.”
And it went on to say: “It should not rewrite MMR when there are no systemic or significant issues in the current advice structure.”
AMI cited the regulator’s feedback on the MMR which found that brokers “asked sufficient questions of customers to objectively assess needs and circumstances and they “probed and challenged customers” as evidence that brokers have an important role to play in helping customers choose the right product for them.
The BSA seemed more sympathetic towards re-examining the relationship between advice and execution only.
It added: “Mortgage advice remains the most suitable approach for the majority of customers. However there are certainly customers who do not require advice when taking a mortgage who have by default been forced down this route as a consequence of the changes introduced by the Mortgage Market Review.
“Rather than undoing some of the work of MMR, a better approach would be to extend the existing execution-only provisions within the Mortgage Conduct of Business (MCOB).
“Lenders and intermediaries should be able to offer factual information and guidance through an execution-only process if the customer requires it.”