The Financial Conduct Authority (FCA) has published proposals for changes to its mortgage sales requirements which it says will help give consumers more choice.
The proposals are one part of a package of remedies from its mortgages market study, which aims to encourage innovation.
In its review of the market, the FCA identified “a number of ways” its advice rules are acting as a barrier to the development of new tools to help customers choose and buy a mortgage.
As a result, the FCA is proposing to change its rules to make it clear that tools which allow customers to search and filter available mortgages are not necessarily giving advice. It will also be clearer that some forms of interaction, such as firms helping consumers with their applications, do not require advice.
Additionally, it said, when a mortgage adviser recommends a mortgage which is not the cheapest of those that meet the customer’s needs and circumstances, they will be required to explain why a cheaper mortgage has not been recommended.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “The mortgage market is working well for most customers but we have identified some areas where our rules are acting as a barrier to innovation. The changes we’ve announced today will allow firms to develop products and services which can truly meet the needs of customers.”
UK Finance’s director of mortgages Jackie Bennett said: “The FCA’s proposals provide helpful clarity on the boundary between execution-only sales channels and mortgage advice.
“This should help ensure that firms can easily provide factual information to borrowers who opt to go through the execution-only route, helping them to choose or switch product quickly and efficiently. It will also support continued innovation, particularly in digital channels.
“The overwhelming majority of new loans are likely to continue being sold under an advised process, during which customers take part in a lengthy interview with the onus being on the lender or adviser to ensure that the mortgage is suitable for the borrower’s needs.”