Specialist Brokers
In the recently released final report of the Financial Conduct Authority’s (FCA) Mortgages Market Study, Connect for Intermediaries CEO Liz Syms provides a unique perspective from specialist brokers. This comprehensive report, a culmination of consultations, affirms the FCA’s discoveries from its in-depth examination of first-charge residential mortgages.
While acknowledging the overall effectiveness of the market in various aspects, the report underscores certain shortcomings that have resulted in adverse consequences for specific consumers. In justifying its interim report findings, the regulator addresses concerns raised during consultations, particularly those related to the perception of an excessive focus on price.
The final report outlines distinct areas where the regulator believes improvements are essential for the market to function more effectively. As we delve into the nuances of the findings, it becomes evident that there is room for enhancement in specific segments of the first-charge residential mortgage landscape. Connect for Intermediaries CEO Liz Syms sheds light on these critical aspects, offering valuable insights into the intricacies of the mortgage market and the potential for positive changes that could benefit consumers.
Specialist Brokers | Criteria clarity and lender panels
Simplifying the mortgage selection process for consumers remains a paramount goal within the financial industry. Intriguingly, the Financial Conduct Authority (FCA) has highlighted a noteworthy challenge: the tools available to intermediaries are somewhat limiting. Despite the emergence of tools like Knowledge Bank and Smartr Criteria, intermediaries still heavily rely on their experience, navigating through many lenders and their diverse criteria.
The FCA’s scrutiny, primarily focused on mortgage transaction data from 2015-2016, acknowledges the partial alleviation provided by new tools. However, it unveils a persistent issue: a lack of 
transparency surrounding eligibility criteria employed by lenders. Specifically, the report underscores that consumers often miss out on more affordable yet equally suitable mortgage options due to undisclosed credit scores and loan-to-income (LTI) criteria.
The report implies that if lenders were more forthcoming about these crucial aspects of their criteria, consumers could make more informed choices, securing better deals in the process. A significant revelation for intermediaries is the FCA’s discovery of a correlation between clients obtaining superior mortgage value and intermediaries operating with expansive lender panels.
Crucially, the FCA notes that certain intermediary panels prioritise a broad spectrum of consumer circumstances, such as those of the self-employed, over a diverse array of lenders catering to specific situations. This focus restricts choice and potentially hinders the delivery of more economical mortgage options for consumers.
In its call to action, the FCA clearly desires the industry to make more significant strides in providing transparent qualification information. The regulator wishes for enhanced transparency and indicates its willingness to collaborate with lenders and the industry at large to bring about positive change in this regard. This emphasises the need for collective efforts to empower consumers with the information they need to make optimal mortgage decisions.
Specialist Brokers | How to compare brokers
Exploring broker options extends beyond mortgage suitability, delving into the realm of consumer choice. The Financial Conduct Authority (FCA) acknowledges that post the Mortgage Market Review (MMR), its regulations have primarily centred around suitability without explicit reference to pricing.
The consequence of this approach is that most new mortgage sales are advised. While this ensures the recommendation of suitable mortgages, it also leads to instances where consumers are directed toward advisory services unnecessarily. Despite the suitability of their mortgage, some borrowers still miss out on the most cost-effective solution.
In recognising the pivotal role of specialist brokers, the FCA has identified the impact of intermediary selection on borrowing costs. Their objective is to streamline the process of comparing different intermediaries, specifically focusing on the scale of an intermediary’s panel. This shift aims to empower consumers by enabling them to transparently assess product ranges and determine whether an intermediary utilises a broad or narrow spectrum of lenders.
The FCA envisions that this initiative will act as a catalyst, motivating intermediaries to engage with a wider range of lenders. To materialise this vision, the FCA plans to leverage the Single Financial Guidance Body (SFGB) and build upon the existing Retirement Adviser Directory. Intermediaries interested in a preview of what this might entail can explore the current directory.
In essence, this endeavour seeks to refine the advisory process and foster an environment where consumers can make informed decisions about intermediaries based on a comprehensive understanding of their offerings and lender partnerships.
Specialist Brokers | Mortgage prisoners and switching
The concluding points highlighted in the report delve into the crucial aspects of rate switching and ensuring equitable treatment for consumers facing challenges in making the switch.
Approximately 10% of customers possess the ability to secure a more favourable mortgage deal but choose not to do so.
A troubling revelation from the FCA’s findings indicates that the inactivity of some consumers is becoming a target for exploitation by certain lenders. Specifically, these lenders are strategically tailoring their rate switch offerings exclusively to clients they believe might consider moving to another lender. The FCA has announced plans to conduct further in-depth analysis on this matter.
The report identifies a significant group of individuals – around 150,000 consumers – labelled as ‘mortgage prisoners.’
These are individuals who, despite maintaining current mortgage payments, find themselves unable to access better deals. This is either due to being associated with inactive or no longer authorised lenders or they no longer meet the stringent criteria introduced post-Mortgage Market Review (MMR). This predicament underscores the need for a comprehensive approach to address the challenges faced by these mortgage prisoners, ensuring fairness and accessibility within the mortgage market landscape.
Specialist Brokers | Food for thought
I appreciate the FCA’s dedication to simplifying the transition process for customers who have fulfilled their payments and no longer need borrowing. The FCA is currently in the process of soliciting opinions on modifications to responsible lending regulations to facilitate this endeavour.
In general, the conclusive document aligns closely with anticipated industry changes. For various reasons, it is crucial that the financial sector adopts a consolidated registry of advisors. The report prompts intermediaries to contemplate its implications for their business models and the trajectory of lender panels moving ahead.
Additionally, this initiative underscores the industry’s responsiveness to clients’ evolving needs and emphasises the importance of continual adaptation to ensure a seamless and efficient financial environment.
As the FCA navigates these adjustments, stakeholders in the financial sector must remain vigilant and responsive, considering how these alterations might influence their practices and partnerships. This development serves as a catalyst for industry players to reassess their strategies and embrace a forward-thinking approach.
We’ve come to the end of our discussion on “Specialist Brokers” until next time.