The Financial Conduct Authority has published a policy statement highlighting potential changes which would make it easier to take out a mortgage without seeking advice.
Amongst the changes, clarification was offered on Perimeter Guidance (PERG) on mortgage advice. Lenders using tools for search and filters are no longer considered to be offering advice.
Advisers will now need to explain why a cheaper mortgage was not offered to the consumer before the mortgage is completed.
Other changes likely to be made could open the door for more firms to make more execution-only sales.
It is hoped that this new change will allow greater competition, more customer choice and a more transparent mortgage market.
The FCA announced the following changes:
- changing our Perimeter Guidance (PERG) on mortgage advice to: – make clear that tools that allow search and filtering based on objective criteria are not necessarily giving advice – more closely align our approach with the recently updated guidance on advising on retail investments
- permitting more customer interaction before firms are required to give advice
- making other changes that may help firms make execution-only sales channels easier to use
- requiring advisers to explain why they have not recommended a cheaper mortgage, where other products meet the customer’s needs and circumstances
- making minor amendments to correct a cross-reference or use a gender-neutral drafting approach in our Handbook text
James tucker founder and CEO of Twenty7Tec said:
“We welcome the publication of the FCA’s final remedies. We work in a market that is constantly evolving through the building and deployment of new technology and clarity on this report was vital in order to plan as an industry and continue to underpin the Government’s housebuilding and home ownership agenda as well as the UK’s future economic success.
“Having reviewed the report thoroughly, we are broadly welcoming of certain elements that encourage the use and development of technology within the market. For example, the clarification in the Perimeter Guidance (PERG) on mortgage advice that make clear that tools that 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.
“Equally, we are supportive of the amendments that require advisers, if they do not recommend the cheapest suitable mortgage, to explain why they have not recommended a cheaper mortgage.
“In the evidence we see from our own systems, this is something that mortgage Intermediaries actively perform at present. I would be inclined to agree with the FCA therefore that this move in and of itself will not force intermediaries to focus on price over suitability – our evidence suggests that suitability is and shall remain critical in any recommendation.
“However, 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.”
