Britain’s financial watchdog that is to say FCA has launched a study on the country’s 1.3 trillion pound ($1.64 trillion) mortgage market to see if customers could get better deals and whether links between industry players harm choice. FCA has launched a study only recently because before of this they began a preliminary work, in October 2015, to see if there were parts of the mortgage market where competition could be improved.
The FCA review revealed that the British government is facing pressure over a housing shortage in parts of the country and rising prices have put home ownership out of reach for many people.
“As a mortgage is likely to be the biggest financial commitment most people make in their lifetime, we’re keen to ensure that competition in the mortgage sector is healthy and working to the benefit of consumers,” said Christopher Woolard, the FCA’s executive director of strategy and competition.
There are 11.1 million home loans totalling 1.3 trillion pounds in debt, with 220 billion pounds borrowed in 2015, according to the Council of Mortgage Lenders, an industry body.
FCA has launched a study because they primarily wanted to focus on residential mortgages, the process of switching products with the same provider and remortgaging with a new one. It will not look directly at commercial or buy-to-let loans. This particular study will also look at relationships between lenders, brokers, price comparison websites and other services such as estate agents, surveyors and conveyancers to see if they affect competition in the mortgage sector, the FCA said.
Property developers who introduce consumers to lenders and brokers will also be looked at. The watchdog said some customers might be coming under pressure from estate agents to use certain brokers if they want to view or secure a property. “We are interested in exploring the incentives estate agents have to refer consumers to use their in-house broker and whether this leads to worse outcomes for consumers,” the FCA said. The CML said it was helpful that the review would look at the whole range of players in the house-buying process, as well as the potential offered by technology to make it easier for customers.
The watchdog has powers to improve competition by writing new rules, asking specific firms to change their behaviour, sanctions, or publishing general guidance. It could also refer parts of the industry to the Competition and Markets Authority for further investigation. The FCA will publish its interim findings and “possible remedies” next summer, with a final report in early 2018.