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FCA: Scope to improve competition in mortgage market

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More can be done to improve competition in the mortgage market despite recent changes to lending rules, the financial regulator has said.

In a report published today, the Financial Conduct Authority (FCA) said firms had “positively applied the responsible lending requirements”, which came into force as part of the Mortgage Market Review (MMR) in 2014.

But it added there was “scope for improving consumers’ ability to make better choices about mortgage deals”.

The FCA review said overall, firms had implemented responsible lending rules under the MMR but some could be more “proactive and consistent in making use of flexibilities and exceptions to [the rules] for existing customers”.

It also said the mortgage market should continue to develop products that meet the needs of older consumers, which represent “an increasing proportion” of the UK population.

However, the regulator said it found no evidence that the new lending rules prevented firms lending to older borrowers and the self-employed.

In a separate report published today, the FCA found that consumers face challenges in “making effective choices”, particularly when it comes to assessing and acting on information about mortgage products, “with intermediaries being key to the process”.

It said there are “opportunities to make more effective use of technology” to provide information and advice to consumers.

It also said commercial relationships – in particular the use of approved panels of lenders by mortgage brokers – could be hindering competition.

The regulator said a new study will investigate ways to improve competition in the mortgage sector, including whether price comparison websites and best-buy tables meet consumers’ needs.

Christopher Woolard, director of strategy and competition at the FCA, said:“For millions of consumers a mortgage is one of the biggest financial transactions they will enter into in their lifetime so it’s encouraging to see firms embrace the spirit and the letter of our rules.

“At the same time, there appears to be more to be done to improve competition in the mortgage sector. Competition can play a key role in ensuring that the sector works well, delivering lower prices, better products and choice, and more innovation.

“Based on the evidence we’ve collected so far, we intend to launch a forward-looking market study later on this year, with particular focus on the roles played by intermediaries and panels.”

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