As the first quarter of 2019 unfolds, the FCA is set to deliver its final report stemming from the Mortgages Market Study – a work in progress since December 2016. Its interim findings published in May 2018 were largely positive. It found a market that is, on the whole, functioning well for consumers but as always there is room for improvement. It highlighted the fact that navigating the market is currently difficult with many customers missing out on making significant savings on the cost of their mortgage. It also noted that tools to support customers in making their decisions are of limited effectiveness.
The mortgage market is unlike other areas of financial services where consumers are frequently less engaged and seldom review their product providers. However, those coming to the end of introductory periods offered by their mortgage provider are much more likely to shop around for other, more favourable deals. UK Finance, the industry body representing the sector points to the fact that in October 2018, homeowners remortgaged loans to the value of £9.2bn, the highest monthly total since the financial crisis. This peak has been fuelled partly by fears that the Bank of England is set to hike interest rates post-Brexit as well as by ongoing political uncertainty in the UK. Against this backdrop mortgage holders are naturally keen to lock into the attractive deals currently available within a highly competitive market and UK Finance expects this level of remortgaging to continue well into 2019.
Despite this relatively high level of engagement, the FCA fears that consumers continue to miss out on some of the best deals due to an inability to view the mortgage market in its entirety and make informed decisions to help them secure mortgages closely aligned individual needs. The regulator also wants to throw a lifeline to longstanding borrowers often referred to as “mortgage prisoners” – those trapped on higher rates due to legislative changes introduced following the financial crisis.
The regulator’s concerns underline its desire to see greater marketplace innovation which it hopes might “allow consumers to better compare products, get support, and apply for a mortgage”. The FCA notes that this is contingent on lenders providing the necessary information if intermediaries are to develop suitable tools to meet this call for innovation.
This has parallels with the rollout of Open Banking in January 2018 which sought to put consumers’ requirements centre stage through greater sharing of financial data with third parties. This has facilitated the creation of a marketplace business model for the banking sector where consumers can access products from a variety of providers via one point of access and take much greater control of their finances from an informed vantage point. Mortgage brokers, estate agents and market aggregators can replicate this by creating platforms to help consumers navigate the options open to them based on their specific circumstances.