Mortgages are by far the largest consumer credit product, with mortgage debt accounting for over 80% of total UK household liabilities. So this is a crucially important sector for consumers.
It is also an important juncture to review the mortgage market. Changes to the regulation of the sector that resulted from the 2014 mortgage market review have heralded a dramatic shift in the way that mortgages are sold. 80% of mortgage sales are now advised. Affordability rules for new mortgages have also become far more stringent.
The FCA's analysis highlights the significant financial detriment experienced by consumers who purchase more expensive products or who do not or cannot switch mortgage product. So we welcome the FCA’s aim to encourage and enable switching.
Our submission makes three key recommendations:
● Before removing any requirements for consumers to take advice, the FCA should undertake further analysis of whether consumers are currently purchasing suitable products, and explore the benefits and costs of any such changes.
● The FCA should require active lenders to switch 'mortgage prisoners' to better deals, and work closely with government to find a solution for those consumers with inactive lenders.
● The FCA should also undertake further work to understand the characteristics of those mortgage holders who could potentially switch, but do not do so, and to design and test potential remedies tailored to these different groups of consumers.