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Specialist Brokers | The FCA Mortgages Market Study

Specialist Brokers

Specialist Brokers


Liz Syms provides a unique perspective on the Financial Conduct Authority’s (FCA) recent Mortgages Market Study. As CEO of Connect for Intermediaries, she represents specialist brokers.

Liz Syms
Liz Syms, CEO and Founder of Connect

This comprehensive report concludes consultations and confirms the FCA’s findings on first-charge residential mortgages. The market is generally effective but has notable shortcomings. These flaws have negatively impacted some consumers.

The regulator’s final report addresses concerns from the interim report. It highlights an excessive focus on price, which was raised during consultations. This report specifies areas needing improvement for a more effective market.

Delving into the findings, there’s clear room for enhancement in first-charge residential mortgages. Liz Syms offers valuable insights into these critical aspects. She highlights potential positive changes that will benefit consumers.

Specialist Brokers | Criteria clarity and lender panels

The financial industry prioritises simplifying the mortgage selection process for consumers. Intriguingly, the Financial Conduct Authority (FCA) has highlighted a significant challenge: the tools available to intermediaries are somewhat limiting. Despite tools like Knowledge Bank and Smartr Criteria, intermediaries rely heavily on their experience. They navigate 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 lender eligibility criteria. Specifically, the report underscores 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 criteria, consumers could make more informed choices and secure better deals. The FCA’s discovery of a correlation between clients obtaining superior mortgage value and intermediaries operating with expansive lender panels is significant for intermediaries.

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 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 to bring about positive change. 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 goes beyond mortgage suitability, delving into consumer choice. The Financial Conduct Authority (FCA) notes that post the Mortgage Market Review (MMR), regulations have focused on suitability without mentioning pricing.

This approach means most new mortgage sales are advised. Ensuring suitable mortgages also leads to consumers using advisory services unnecessarily. Despite having suitable mortgages, some borrowers miss out on the most cost-effective solutions.

Recognising the role of specialist brokers, the FCA highlights intermediary selection’s impact on borrowing costs. Their goal is to streamline comparing different intermediaries, focusing on the scale of an intermediary’s panel. This shift aims to empower consumers to assess product ranges and determine if an intermediary uses a broad or narrow spectrum of lenders.

Question Mark

The FCA envisions this initiative as a catalyst, motivating intermediaries to engage with a wider range of lenders. The FCA plans to leverage the Single Financial Guidance Body (SFGB) and expand the Retirement Adviser Directory to achieve this. Intermediaries interested in a preview can explore the current directory.

This endeavour aims to refine the advisory process. It seeks to create an environment where consumers make informed decisions about intermediaries based on a comprehensive understanding of their offerings and lender partnerships.

Specialist Brokers | Mortgage prisoners and switching

The report highlights crucial aspects of rate switching and fair treatment for struggling consumers.

Around 10% of customers can secure better mortgage deals but choose not to act.

The FCA’s findings reveal a troubling revelation: Some lenders exploit inactive consumers by tailoring rate switch offers to clients likely to consider switching lenders. The FCA plans to conduct further in-depth analysis of this issue.

The report identifies a significant group of around 150,000 ‘mortgage prisoners’. These individuals maintain current payments but can’t access better deals due to their association with inactive or unauthorised lenders. They also face issues meeting stringent post-mortgage Market Review (MMR) criteria.

This situation highlights the need for a comprehensive approach. It aims to address challenges faced by mortgage prisoners. Ensuring fairness and accessibility within the mortgage market is essential.

Specialist Brokers | Food for thought

I appreciate the FCA’s dedication to simplifying the transition for customers who no longer need borrowing. To support this effort, the FCA is currently seeking opinions on changes to responsible lending regulations.

The final document aligns closely with anticipated industry changes. For various reasons, the financial sector must adopt a consolidated registry of advisors. The report encourages intermediaries to consider its impact on their business models and lender panel trajectories.

Moreover, this initiative highlights the industry’s responsiveness to clients’ evolving needs. It emphasises the importance of continual adaptation to ensure a seamless and efficient financial environment.

connect for intermediaries

As the FCA navigates these adjustments, stakeholders must remain vigilant and responsive. They need to consider how these changes might influence their practices and partnerships. This development encourages industry players to reassess their strategies and adopt a forward-thinking approach.

We’ve reached the end of our discussion on “Specialist Brokers.” Until next time.


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