The BSA has today published its response to the FCA Interim Report into Competition in the Mortgage Market.
It is pleasing that the FCA recognises the high levels of customer engagement in the mortgage market, and that competition works well for the vast majority of consumers.
However, it is disappointing that the report implies that price is the most important or only factor when choosing a mortgage. Price is important, but any move to price-driven, commoditised markets risks eroding competition, innovation and the development of specialist products that many customers rely on to access mortgage finance.
Building societies lend across the consumer spectrum, serving first time buyers, older borrowers, the self-employed and those with more complex needs. This ensures that the widest group of borrowers that can afford a mortgage have access to one.
When publishing the report, the FCA said that it intended to explore options to help longstanding borrowers who cannot switch. The BSA has worked with UK Finance and the Intermediary Mortgage Lenders Association (IMLA) to develop a cross-industry voluntary commitment which will help customers, previously unable to move from a reversion rate to switch to another product.
The BSA and its members will continue to work with the FCA and industry bodies to consider what can be done to help customers with inactive lenders and unregulated mortgage owners. Such lenders are not members of any of the three industry bodies.
The BSA submission comments on:
- Regulatory stability and innovation
- Price and effective competition
- Mortgage prisoners (also see joint cross industry press release)
- Helping consumers choose the right mortgage
- Lending criteria
- Advice v execution only
Commenting, Paul Broadhead, Head of Mortgage and Housing Policy at the BSA said:
“The focus on price alone as the primary metric to delivering a good customer outcome is misguided. Customers take into account a range of factors when deciding which mortgage is right for them, and the vast majority do so following advice from a lender or mortgage intermediary.
“When implementing the Mortgage Market Review, and when conducting this study, the FCA concluded that the mortgage market works well for the vast majority of customers. Where it works less well, the industry has stepped up and developed a voluntary agreement to help longstanding borrowers that were struggling to switch.
“When considering responses to the interim report the FCA should be mindful not to take any action that stifles innovation: the market has moved on considerably since the report and must continue to do so in order to remain fit for purpose and be able adapt to constantly evolving customer needs.”
Press office contacts:
Hilary McVitty: 020 7520 5926 / 07507 837 326
Amy McCluskey: 020 7520 5927
Notes to Editors:
- A summary of the submission to the FCA
- The full submission to the FCA
- The Building Societies Association (BSA) represents all UK building societies, which collectively serve more than 23 million customers and have total assets of over £393 billion. Together with their subsidiaries they hold residential mortgages of over £302 billion, 22% of the total outstanding in the UK. They hold over £271 billion of retail deposits, accounting for 18% of all such deposits in the UK. Building societies account for 36% of all cash ISA balances. They employ approximately 43,000 full and part-time staff and operate through approximately 1,500 branches.