On 16 May 2016, the FCA published the findings from its thematic review on Embedding the Mortgage Market Review: Responsible Lending Review (TR16/4) and a feedback statement on its call for inputs on competition in the mortgage sector.

The two key conclusions from the thematic review on responsible lending rules, which the FCA introduced in April 2014, were that firms have positively applied the responsible lending requirements, which came into force as part of the Mortgage Market Review (MMR).  Despite this, the FCA found that there is still scope for improving consumers' ability to make better choices about mortgage deals.

More specifically, the FCA highlighted that some firms could be more proactive and consistent in making use of flexibilities and exceptions to the responsible lending requirements for existing customers. The FCA is providing feedback to individual firms which were visited by the FCA as part of the assessment and encourages all lenders to consider the questions set out in Annex 2 of the report when reviewing their responsible lending policies and processes.

The call for input on competition in the mortgage sector brought to the surface four main themes, which were as follows:

  • 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.
  • There are opportunities to make more effective use of technology in the provision of information and advice.
  • Commercial relationships between different players in the sector’s supply chain, in particular the use of panels, might give rise to competition concerns.
  • Certain aspects of the regulatory framework might have a negative impact on competition.

In an attempt to improve competition in the mortgage sector, the FCA will launch a targeted market study in Q4 2016 focusing on consumers’ ability to make effective choices, with a view to improving how competition works in consumers’ best interests. The FCA’s intention is to explore questions relating to the available tools for comparisons, the impact of increased intermediation in the sector on consumer outcomes and the impact of panel and other commercial arrangements between lenders, brokers and other players in the mortgage supply chain.

Following the FCA’s publications, the Council of Mortgage Lenders (CML) issued a press release noting the outcome of the FCA’s findings and feedback statement and explaining that the areas identified by the FCA as having scope for improvement, are areas that the CML is proactively addressing as part of its ongoing work on transparency, following the launch of the common mortgage tariff last year.