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Briefings

FCA launches market study on mortgage sector competition

Date: 13/12/16

FCA launches market study on mortgage sector competition

The Financial Conduct Authority (FCA) yesterday launched its long-awaited market study on competition in the mortgage sector which highlights the role of house builders as a particular area of interest in a much wider review of current practice and activity in the mortgage market.

In publishing its Draft Terms of Reference, the FCA has highlighted the ‘close relationship’ between developers and brokers, and the ‘limited number of lenders’ who brokers place this business with.

The second of the FCA’s broad questions to be considered by the study will therefore be of particular interest. The two questions are:

  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?

If, after publishing its findings, the FCA deems the market not to be working well it has the power to intervene to promote competition. This could be done by changing rules, publishing new guidance (or enhanced self-regulation) or introducing firm-specific remedies or enforcement action. The FCA could also refer one or more issues to the Competition and Market Authority (CMA) for further investigation.

Comments on the Draft Terms of Reference are invited by 12 January. An interim report is then expected in summer 2017 before final conclusions are published in early 2018.  HBF will be engaging with the FCA on the matter and we will be in touch on this in due course.

The Terms of Reference can be read here, along with the FCA’s press release here.

David O’Leary, Policy Director