Apr 19 – A study in time

The FCA final report of the Mortgages Market Study set out its plans to resolve the issues it identified.  It has accepted, for now, the industry view that intervening to promote solutions to assist consumers to more easily find the right mortgage might slow innovation.  However, it will continue to monitor progress to ensure that solutions under development successfully come to market and work effectively to deliver the best and cheapest mortgages to all consumers.  It will be for the industry to show that this is working or the FCA might look to intervene in 2020 to encourage lenders to deliver more of their decisioning data to technology providers to assist in making decisions in principle more certain.  Better use of consumer data available from credit reference agencies and open banking should also be meshed into this to deliver better results.

The new tool to assist consumers find a mortgage broker will be developed by way of an extension to the retirement adviser tool already hosted by the Money Advice Service.  AMI will be working with MAS and others in the industry during the rest on 2019 to deliver the specifications for this new system to ensure it works fairly and efficiently for consumers and brokers across the industry.  It will be developed within the existing budgets of the new Money and Pensions Service (formerly MAS), will be free to join and all leads resulting will not attract a charge.

The work on trapped borrowers is also welcome and we will also be meeting with the FCA, lender trade bodies and others to try to find a workable solution to this issue.  Government is keen for this work to be accelerated and we will ensure that advice and broker options are kept at the front of deliverable solutions.  The revised rules on assessing affordability for existing borrowers will need careful consideration and we will be working on these on your behalf.

Finally, once we get more clarity on any Brexit timetable we will see a new consultation on “Advice”.  It appears that some technology firms feel the current interaction rules make it difficult to develop quality solutions.  The rules developed out of MMR and the Mortgage Credit Directive legislation give clarity on what is advice and what a consumer needs to know to undertake execution only.  We may see a move closer to the post-FAMR world of investments regarding “making a personal recommendation” or “non-advised”.

Whilst the headlines which emanated from the report of customers being forced to take advice caused me concern, the narrative recently set out by Sheldon Miles of the FCA is more consistent with our understanding of the market.  Where a customer is asking for administrative help, simple explanations or information, this is not advice.  However many firms are deeming all interactions to be “advised” in order to simplify their processes or reduce their risks.  Help from the FCA to better explain the boundaries of their rules will assist firms.  This is our expectation from recent discussions.

However should the FCA decide to go further and loosen the boundaries and make execution only simpler we would expect there to be greater need for clear and balanced warnings of the loss of FOS and FSCS protections for the consumer in going down that route and that new processes should be fully available to be used by intermediaries as well as directly by lenders.  We expect most lenders to still want their products to be advised on to ensure that the customer is getting what is right for them.  They cannot avoid the suitability issue because by undertaking affordability assessments, the intrusive questioning on which makes most consumers think they have had advice.

Robert Sinclair
April 2019