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Broker and lender commercial arrangements to be scrutinised by FCA

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The regulator will look at the difference in outcomes for consumers who obtain their mortgages through mortgage brokers when compared with those who go direct to lenders.

The FCA will also look at the impact of panel and other commercial arrangements between lenders, brokers and other players in the mortgage supply chain.

It will review whether there could be potential conflicts of interest or misaligned incentives or whether such arrangements create barriers to entry or expansion providing consumer with less choice.

The announcement comes after the FCA revealed the results of its Responsible Lending Review which found that firms had overall implemented responsible lending rules in line with the FCA’s expectations.

However, it did find more firms could be more proactive and consistent in making use of flexibilities and exceptions to responsible lending requirements for existing customers.

Chris Woolard, Director of Strategy and Competition at the FCA said that for millions of consumers, a mortgage was one of the biggest financial transactions they would enter into in their lifetime.

“…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.

Chris added, “Competition can play a key role in ensuring that the sector works well, delivering lower prices, better products and choice, and more innovation”.

“Based on the evidence we’ve 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.”

Director General of the Council of Mortgage Lenders, Paul Smee, said the body was pleased that the regulator had identified no significant faults in the market.

“This is testament to the level of commitment that lenders showed in implementing the new requirements that emerged as part of the Mortgage Market Review.

“Through our voluntary transparency initiative, working jointly with Which?, we are fully engaged with the consumer choice agenda that the FCA identifies as an area for study later in the year.

“We are already looking to make the kind of progress that will make it easier for consumers to compare and understand their options, and look forward to working constructively with both the industry and the regulator on this.”

Paul

The author Paul