The Financial Conduct Authority (FCA) is to review mortgage panel arrangements and the role played by advisers in connecting consumers with mortgage products, its director of strategy and competition has said.
The regulator will launch a new "forward-looking" market study later this year after its latest research indicated firms have adapted well to rules introduced by the Mortgage Market Review (MMR) but have not succeeded in creating a competitive market.
The FCA started a mortgage market call for input in October. The work heard from 80 organisations and individuals in person, alongside 40 written submissions from a variety of stakeholders, and found consumers faced challenges in making effective choices when shopping for a mortgage.
This was particularly apparent when it came to assessing and acting on information about mortgage products, with intermediaries being key to the process, the regulator said. Commercial relationships between different players in the sector's supply chain - in particular the use of panels - may give rise to competition concerns, it warned.
Creating effective competition is one of the FCA's three operational objectives and the regulator believes it is vital to support market integrity and drive benefits for consumers.
Based on the findings, the regulator has said it wants to explore further how the intermediated market works for consumers.
Specifically, it will look at whether available tools designed to help consumers make choices, such as advice, meet their needs, and how intermediation changed after the MMR. It will inspect how products are being sold and assess whether there are any distortions in the market because of a focus on particular headline charges or features.
The work will also look at specific consumer segments with less common needs and how technology can help to serve this market. Parts of the work will look at the regulator's own rules determining whether some of its framework could have a negative impact on competition.
The regulator had already warned last July that, under the new MMR rules, some firms were found to be relying too heavily on tightly structured processes, forcing their advisers to bend information to give supposedly 'suitable advice'.
Finally, the FCA said it would will examine the impact of commercial arrangements between lenders and brokers, such as panels, to see if there is a potential for conflicts of interest or misaligned incentives.
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 the sector works well, delivering lower prices, better products and choice, and more innovation.
"Based on the evidence we have 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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