How is the mortgage market working for consumers?
The Financial Conduct Authority (FCA) published its interim report into the current UK mortgage market, identifying some areas where the mortgages market could work better for customers.
The report explained where the market could provide more support to help customers find the best-priced suitable mortgage deal. It also identified a large number of borrowers who don't or can't switch to a better deal.
Our response concentrates on our clients who are in problem debt and their needs in relation to the mortgage market. Our clients with mortgages are more likely to be vulnerable, have poor credit ratings and be older than those in the general population. There are also particular issues for our clients who are on low or fluctuating incomes.
"My husband suffers with depression and our issues with getting a mortgage and being in debt affect him greatly. This impacts on myself and my children."
StepChange Debt Charity client, March 2018
We recommend that the FCA specifically considers providing greater protections to these vulnerable consumers, who currently suffer the greatest detriment when choosing mortgage products, as part of any changes in its regulation of the mortgage market.
We highlighted the following issues that the FCA should ensure as part of its regulation of the mortgage market:
- There should be no reduction in consumer protection measures and more support for customers through free-to-client mortgage advice services, as well as greater transparency in the fees charged for advice by intermediaries
- More consideration should be given to different channels of support, such as telephone and face-to-face services, while also improving the accessibility of online tools for vulnerable consumers and better signposting to free mortgage advice services
- Specific impact assessments of any new FCA proposals should be conducted, focusing on customers for whom the mortgage market isn't working well, including those with poor credit ratings, those in low and/or variable incomes, and those of (or approaching) retirement age
- Further consideration should be given to changing the FCA's mortgage advice rules around requiring firms to consider price when assessing whether products are suitable for a customer's needs and circumstances
- Ensuring a proactive approach by lenders to provide customers switched onto standard variable rates with accessible and timely information about other options available to them
- Development of an industry-wide agreement of an internal switch for all customers who meet the certain criteria, who are currently automatically switched onto standard variable rates after their initial deal has ended. This should be subject to regulatory requirements, if lenders don't voluntarily address the problem
Download the response to read our full recommendations.