The Financial Conduct Authority (FCA) has published its Mortgages Market Study Final Report and a consultation on the new relative affordability test.
It is reassuring that the FCA found the mortgage market works well generally, with high levels of consumer engagement, but as ever there are some areas where it would like to see the market work better.
Pleasingly, the focus on cheapest mortgage being the best mortgage has softened and it is recognised that there are a range of factors to be taken into consideration when choosing the most appropriate product.
The FCA also reports that the need for more certainty earlier in the process, in terms of which mortgage a borrower is eligible for, is vital.
The BSA has argued against intervention in this area: the market is already coming up with solutions to provide this with increasing innovation.
While it is still fairly early days, a range of technology solutions such as Criteria Hub and Knowledge Bank continue to come to market which puts the position for consumers and brokers streets ahead of any regulatory intervention.
Such intervention would be likely to reduce innovation and investment in this area – ultimately to the detriment of the very consumers that FCA would like to help.
Government action on mortgage prisoners
Clearly, the main focus and the content that will be of most interest to consumers are the proposed changes to allow a modified affordability test.
The test is designed for those borrowers that are up to date with payments on their existing mortgage, and who are looking to switch to a more affordable mortgage without borrowing more.
This will enable some borrowers to remortgage away from an inactive lender and take advantage of better deals available on the market.
While a modified affordability test will certainly help a number of borrowers, many will still not be able to remortgage.
Borrowers should not be disadvantaged purely because their mortgage has been sold to another entity.
Consumer protection is vital for these people and it has to be the government that takes action to protect these borrowers.