Firstly, it felt the Mortgage Market Review introduced in 2014 had brought in some barriers to developing tools that help consumers choose a mortgage.
Secondly, the FCA was concerned that consumers looking to buy an execution-only mortgage are diverted to having to take advice and that execution-only sales channels are not always easy to use.
Thirdly, it believes many consumers are overpaying for their mortgages, even when they get advice.
The FCA received 66 responses from firms, trade bodies and consumer groups to its consultation paper and it said most responses were supportive of the proposals.
Execution-only concerns
However, intermediary firms had some concerns about the proposal to make execution-only sales channels more accessible, particularly removing prescriptive detail from execution-only sales policy.
The FCA says the changes will make it easier for firms to present options to consumers without giving regulated advice and will help firms make execution-only sales channels easier to use.
It also said that recent changes to its responsible lending rules should reduce regulatory barriers and help consumers get the right mortgage.
The FCA is finalising it Perimeter Guidance (PERG) on mortgage advice to make clear that tools which allow search and filtering based on objective criteria are not necessarily giving advice. It wants lenders and intermediaries to make execution-only sales channels easier to use.
James Tucker founder and CEO of Twenty7Tec broadly welcomed elements that encourage the use and development of technology within the market.
He said: “For example, the clarification in the Perimeter Guidance on mortgage advice that makes clear tools which allow search and filtering based on objective criteria are not necessarily giving advice, coupled with permitting more customer interaction before firms are required to give advice, supports a fair and transparent market with customer choice and information at its heart.
“In fact, we have been active in supporting our customers in the building and maintenance of these tools for some time now, and shall continue to do so.
However, one area of contention on advice is the FCA’s example that advisers can say: “I suggest you take out (or do not take out) a variable rate mortgage”, by itself, is not regulated advice. Instead, the FCA says it is an example of generic advice rather than advice on whether to enter into a regulated mortgage contract.
Tucker commented: “We are concerned that changes in the policy statement that allow channels to suggest borrowers “take out or do not take out” a certain type of mortgage, the seeming permittance of dual-pricing strategies, and the amendment of the sales process rules to highlight the FCA’s belief that execution-only sales are not inherently riskier than advised ones, come with potential detriment to the customer and wider industry.”
The FCA’s Mortgage advice and selling standards: feedback to CP19/17 and final rules came into force on 31 January 2020.
However, to allow firms time to adapt their processes to accommodate the changes made in MCOB 4.4A.1R(1A) and MCOB 4.7A.23AR, a transitional period will run to 30 July 2020.
