We are slightly concerned that the FCA has placed so much emphasis on whether borrowers are being recommended the cheapest products, rather than on the importance of borrowers choosing, or being recommended, products which are suitable for their needs and circumstances. We look forward to working with the FCA to ensure that the rules will continue to stress the importance of suitability going forward.
The FCA also talks about needing to balance the “cost and inconvenience” of advice – with the risk of choosing an inappropriate product on a non-advised basis. Any proposal to move away from the current requirement, that the majority of sales should be advised, presents many challenges. Regulation may be able to provide a range of options for consumers, but it cannot guarantee that those consumers will necessarily select the most appropriate option – which is precisely why advice was mandated by the Mortgage Market Review (MMR).
The FCA has suggested that it would like to investigate how, at an early stage, consumers could identify which mortgage products they qualify for, and to assess and compare those products. We have questions about the level of appetite among potential borrowers for such a service, and are concerned about unintended consequences: a crude auto-eligibility tool could dissuade some borrowers who, with the right broker, could find an affordable mortgage. This is precisely why so many borrowers appreciate and seek out the services of a broker – because they don’t have the time or expertise to scour the market themselves. The existing KFI was designed so that borrowers would provide sufficient information to enable a bespoke, personalised illustration to be generated. We know from the regulator’s own research that consumers have tended not to use the KFI as a means of comparing multiple offers, as originally intended, but we don’t regard that as sufficient reason to encourage comparisons to be made on a less accurate basis.
We share the concerns expressed about borrowers who find themselves stuck on a reversion rate. We would be interested to work with the FCA to resolve the issue of these so-called ‘mortgage prisoners’, some of whom may have fallen foul of the additional affordability requirements implemented by the regulator itself in the wake of the MMR.
Kate Davies, Executive Director
Notes to Editors
The Intermediary Mortgage Lenders Association (IMLA) is the trade association that represents mortgage lenders who lend to UK consumers and businesses via the broker channel. Its membership of 43 banks, building societies and specialist lenders include 18 of the 20 largest UK mortgage lenders (measured by gross lending) and account for about 90% of mortgage lending (91.6% of balances and 92.8% of gross lending).