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CML urges FCA to consider targeted deregulation as a potential driver for competition

Published: 21 December 2015

Responding today to the FCA's "Call for inputs" on competition in the mortgage market, which will help to determine whether and how the FCA takes forward a market study on this subject next year, the Council of Mortgage Lenders urges the regulator to consider whether the many recent layers of newly imposed regulation might in some ways be hindering competition, and whether some targeted deregulatory adjustments might potentially help the competitive landscape.

There has been significant regulatory upheaval in the UK mortgage market over the past few years. One consequence has been that lenders have had to focus resources on delivering requisite regulatory changes, perhaps at the expense of innovation aimed at customers.

So the CML believes that regulators should go easy on any further reform, focusing for the time being on areas where regulation could be causing competitive distortion or suppression of legitimate business.

Specifically, the CML believes that there is the potential for:

  • A focus on how the regulatory environment can better support a digital mortgage market. With consumers keen to research and transact online, yet with regulation seemingly one step behind, it might be possible to improve competition by ensuring that online channels are able to compete effectively with face-to-face environments.
  • A more holistic approach to advice, of the type that that the CML has already set out in recent reports on retirement borrowing, to ensure that borrowers benefit from good access to suitable advice across the while range of potential products and solutions, while recognising that advisers have different specialisms and different qualifications dictating the products on which they can advise.

CML director general Paul Smee comments:

Overall, we think the UK mortgage market is actually very competitive - as thousands of mortgage products from well over a hundred lenders testify. Yet, in recent years, lenders have had to focus a lot of their resources on implementing the changes flowing from new regulation. To help the market grow in competitive terms from here, it needs a period without too much further regulatory intervention.

That said, there are some areas where modest deregulation - or, at least, permissive clarity from regulators on areas where taking a liberal interpretation currently feels like a risk to lenders - might help. Examples include the rules on assessing affordability when lending to borrowers whose loans will extend into retirement, as well as ensuring that the rules on mortgage sales and advice are fit for purpose in a digital age.

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 95% of all residential mortgage lending in the UK. There are 11.1 million mortgages in the UK, with loans worth over £1.3 trillion.

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