The UK’s Financial Conduct Authority (FCA) has today announced the terms of reference for a market study into residential mortgages. The FCA expects to publish an interim report in the summer of 2017. Frontier (Europe) is advising Lloyds Banking Group on the mortgages market study.
The FCA will focus its market study on two main issues: whether customers have the available tools (including advice) to make effective decisions and whether commercial arrangements between lenders and other players lead to conflicts of interest or misaligned incentives. The focus on these issues means the FCA will effectively be assessing how well both the demand-side (customers and their behaviour) and supply-side (banks, brokers and other parties) are functioning.
The market for mortgages was previously reviewed in the Mortgage Market Review (MMR) in 2009. The FCA has noted that much has changed since then including more use of intermediaries to find a mortgage (such as going to a broker) and more uptake of regulated advice. The latter has been raised by some stakeholders as a potential regulatory barrier in providing new and innovative forms of advice. Examples might include the use of robo-advice, a form of online and automated advice. The impact of these changes and the extent to which they have been driven by the MMR will be explored further in the market study.
Frontier regularly advises financial institutions on issues of regulation and competition policy.
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