FCA Proposes Changes to its Mortgage Advice and Selling Standards

Background

On 7 May 2019 the Financial Conduct Authority (FCA) published the long awaited consultation (CP19/17) on proposals for changes to its mortgage advice and selling standards to address three harms identified through its Mortgages Market Study (MMS):

• That its advice rules and guidance are a barrier to the development of tools to help consumers choose and buy a mortgage.
• That consumers who would like to buy a mortgage on an execution-only basis find it difficult to do so because they are diverted to advice and because execution-only sales channels are not always easy to use.
• That many consumers are overpaying for their mortgages, even when they get advice.

FCA Proposals 

These proposals are aimed to help address the harms by making it easier for firms to present options to consumers without giving regulated advice, enabling firms to make their execution-only sales channels easier to use and by requiring advisers to take account of price when choosing between suitable mortgages.

To address these harms the FCA is proposing to: 

• Change its Perimeter Guidance on mortgage advice to make clear that tools that allow search and filtering based on objective criteria are not necessarily giving advice, and to more closely align to the recently updated guidance on advising on retail investments. The aim is to facilitate online transactions and digital delivery of mortgages.
• Permit more interaction with customers before firms are required to give advice. Firms are currently tripped into an advised mortgage sale where there is any form of interactive dialogue through the sales journey – again this is very restrictive for firms (the example given in the CP is where an online execution only journey freezes and the customer calls up – this automatically triggers an advised sale). The CP is consulting also on modifying the interaction trigger to exclude interactions that are unconnected with regulated advice (e.g., support with an application or ongoing case management and allowing firms to use generic information to answer questions).
• Make other changes that may help firms making their execution-only sales channels easier to use.
• Require advisers, if they recommend a mortgage which is not the cheapest of the mortgages that meet the customer’s needs and circumstances, to explain why they have not recommended a cheaper mortgage.

These remedies aim to work together to support the FCA's suggested remedies in the MMS to ensure consumers have the information and support they need to make informed choices about how they buy a mortgage, and help ensure they get good value from advice. 

Next Steps

The FCA is seeking comments by 7 July 2019.  The FCA will then consider any feedback received and plans to publish a Policy Statement late in 2019.