From 1st July the Council of Mortgage Lenders is integrated into a new trade association, UK Finance. For the time being, all UKF mortgage information will continue to be published on this website, and UKF member-only mortgage information will only be available here.

UK Finance represents around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation takes on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association. Please go to www.ukfinance.org.uk for wider content and updates from UK Finance.

Last updated: 7 March 2017

At a glance

In their Business Plan 2015/16, the Financial Conduct Authority (FCA) announced their intention to review whether there are any barriers to competition in the mortgage sector. This was to commence in autumn 2015, with a view to launching a market study in the first quarter of 2016.

In their Feedback Statement to the Call for Inputs on competition in the mortgage sector the FCA then announced their intention to launch a market study focusing on areas where competition can potentially be improved for the benefit of consumers. 

On 12 December 2016 the FCA published the terms of reference of the much anticipated Mortgages Market Study (MS16/2).

The Terms of Reference states the FCA will consider two broad questions, which focus respectively on demand and supply issues. These questions provide the bounds of the work in line with the Feedback Statement. They are as follows:

  1. At each stage of the consumer journey, do the available tools (including advice) help mortgage consumers make effective decisions?
  2. Do commercial arrangements between lenders, brokers and other players lead to conflicts of interest or misaligned incentives to the detriment of consumers?

The elements of the mortgage market that will be in scope are first charge residential mortgages, including:

  • New mortgage for house purchase (including ported products)
  • Remortgage (new lender)
  • Internal product switch (same lender)
  • Further advance
  • Equity release – lifetime mortgage

The elements that will be out of scope are:

  • Buy-to-let mortgage
  • Second charge mortgage
  • Variation of terms for first charge residential mortgages (other than a product switch) including change of term, change of repayment method, transfer of equity
  • Commercial mortgage
  • Equity release – home reversion

The link at the bottom of the FCA Market Studies and Market Investigations landing page (Find out more about how we conduct market studies) may also be of interest.

Activity

Following on from our work around the Mortgage Market Review (MMR), we will continue to engage with the FCA throughout the Mortgages Market Study process and will ensure that members are fully involved.  

We responded to the the FCA call for inputs on competition in the mortgage sector consultation and broadly noted that there have been significant regulatory changes to the UK mortgage market over the last few years. Lenders have reported that the constant evolution of regulation has led to resources being focused on delivering, for example, extensive system changes to meet regulatory requirements, rather than on innovation aimed at the borrower. 

In light of this, we believe any further reform should be staged, proportionate, and, as a starting point, focused on identifying where regulation itself is causing competitive distortion in the market.

A further key area we feel worthy of further exploration is the scope for increased digitisation in the mortgage sales process. We believe that the FCA can usefully work with lenders, intermediaries and suppliers into the market to better allow new technologies to be exploited for the benefit of consumers and industry alike.

March 2017: data requests were issued by the FCA for their three strands of work – the Mortgages Market Study; Customer Understanding of Transactions Thematic; and Maturing Interest Only Thematic – to all those firms selected.

Next steps

The FCA aims to publish an interim report setting out their analysis, preliminary conclusions and, where practicable and appropriate, proposed solutions to address any concerns identified, in summer 2017.

This will provide stakeholders with an opportunity to comment prior to publishing the final report in early 2018.