Press comment: The FCA continues to downplay
the importance of advice in the mortgage market
7 May 2019
If you are covering the FCA’s consultation paper on mortgage advice and selling standards published today, please see the following comment from Gemma Harle, managing director of the Intrinsic mortgage network, part of Quilter:
“Considering a mortgage is likely to be the single largest piece of debt someone takes on in their life it seems strange that the FCA, in their consultation paper released today, is seemingly lamenting the fact that this important decision is increasingly being taken with the addition of mortgage advice.
“In fact the take up of advice in this area is thanks to the regulators’ Mortgage Market Review (MMR). Before the financial crisis around 70% of new sales were advised, this jumped to 97% post the MMR, which was the intention. Now the regulator looks to be back peddling. In some respects its proposals are rational, but there is a real risk that removing the need for advice will be at the detriment to the public.
“Consumers are naturally going to have a laser focus on price given mortgage payments are often the largest monthly sum out of take home pay, however headline price is only one factor to consider. Some mortgages might on the face of it look like they are cheaper, but due to a variety of reasons they might not be suitable and could even end up costing the consumer more in the long run.
“It seems somewhat irresponsible to relax the rules around execution-only mortgages. The industry is multifaceted and the products are complex and there is never a one size fits all mortgage. An adviser can help someone balance what might seem cheaper with the benefits of additional features. An adviser will look holistically and objectively at a consumer’s financial life and be able to suggest products utilising their in-depth understanding of the market place. In particular they are best placed to understand whether a customer will be eligible for a mortgage and help them avoid being declined by a lender, slowing down the house buying process, as they didn’t understand the lending criteria. Another important point is that typically lenders do not accept execution-only mortgages from an intermediary, as they want consumers to go directly through them. Given intermediaries go across the whole of market, the unintended consequences of trying to increase the number of execution-only mortgages could be that there is less choice for this type of consumer.
“However, the FCA is sensible in its suggestion to relax its definition of what constitutes advice to not include guidance tools which allow customers to search and filter available mortgages as providing customers with as much information as possible is an important part of the equation. Similarly, the FCA’s proposal to require advisers to explain their reasons for suggesting a more expensive mortgage instead of a cheaper one is not a particularly bad suggestion, most advisers will do this during the advice process regardless and their decision will never be led by price alone anyway.
“Naturally, the mortgage market needs to adapt and evolve but this should not be at the expense of advice. The FCA should be more attuned to what the potential ramifications of watering down the importance of advice could be for consumers if they fail to get advice and buy an unsuitable product.”
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