Thursday, June 20, 2024

Mortgage Market Study contains both opportunities and threats to mortgage market says Twenty7Tec CEO James Tucker

James Tucker, CEO of Twenty7Tec – a leading provider of technology to the mortgage industry – has today responded to the publication of the Financial Conduct Authority (FCA) final rules and guidance on mortgage advice and selling standards.

The FCA ran its Mortgage Market Review in 2016, with its findings published in March 2019. However, the FCA has only now published its final findings.

“We’ve been waiting for the FCA to publish its final remedies in relation to the Mortgage Market Survey for nearly a year now,” says Twenty7Tec’s founder and CEO.

“Twelve months is a long time in a market that’s constantly evolving through the building and deployment of new technology. Clarity on this report was vital so that we can plan as an industry and continue to underpin the Government’s housebuilding and home ownership agenda.

“Having reviewed the report thoroughly, we are broadly welcoming of certain elements that encourage the use and development of technology within the market, and see the opportunity to develop these solutions further.

“For example, the clarification in the Perimeter Guidance (PERG) on mortgage advice that make clear that tools that allow search and filtering based on objective criteria are not necessarily giving advice, coupled with the changes that permit greater customer interaction before firms are required to give advice, supports a fair and transparent market with customer choice and information at its heart.

“In fact, we have been active in the building and maintenance of these direct to consumer tools for some time now, and shall continue to do so.

“Equally, we are supportive of the amendments that require intermediaries to explain in more detail why they have recommended certain products, particularly where the product is not the cheapest.

“In the evidence we see from our own systems, this is something that mortgage Intermediaries actively perform at present. I would be inclined to agree with the FCA therefore that this move in and of itself will not force intermediaries to focus on price over suitability – our evidence suggests that suitability is and shall remain critical in any advised recommendation.

“However, we are concerned with the changes in the policy statement that allow channels to suggest borrowers “take out or do not take out” a certain type of mortgage, the seeming permittance of dual pricing strategies, and the amendment of the sales process rules to highlight the FCA’s belief that execution-only sales are not inherently riskier than advised ones.

“We believe that there is space in the market for intermediaries, lenders and for self-service. That choice will improve the consumer’s position when it comes to selecting a mortgage, and technology should be supportive of that.

“That said, there are tens of thousands of mortgage products on the market. Each of them has over 700 pieces of criteria. My fear is that without professional advice, even the best-informed consumers won’t necessarily access the right product for their needs.

“We are not alone in perceiving both the opportunity and threat that technology poses to our industry: in the pensions and savings markets, there is a belief that a financial dashboard will act as a panacea. For me, the same applies there as it does with investment portfolios and beyond. It’s useful, but it doesn’t replace or replicate an informed independent, professional opinion.

“Do I think that intermediaries will need to continue to demonstrate where they add value to customers? Yes.

“Do I think that execution only mortgages risk leaving consumers exposed? Yes, I do. The lack of advice means there is no protection or recourse for when things go wrong. Consumers may well find themselves more susceptible to failing to notice the insertion of egregious terms or overly large early repayment charges which hold people prisoner to their mortgage.

“The question is, what problem is the FCA trying to solve? If it’s upskilling and providing ever better levels of choice to consumers, then I’d say that we have made huge progress on that front and continue to do so with every passing month, with or without the outcomes of this study being implemented.

“The market has struck a price for advice and I’m a great believer in the market being let to set the price as well as protect the consumer. Is that balance changing as a result of technology? Yes. Will the market move again? Yes. But does it need a radical, top down overhaul? My instinct tells me that it does not and that any attempt to force it risks doing more harm than good.

“We believe in faster, smoother transactions where parties are well informed as to their choices and have had a chance to reflect on their financial priorities. The tools we provide are used to support well-trained and knowledgeable intermediaries who then advise their clients. It’s a great match of data and experience.

“There is always going to be a place for good advice in the mortgage market. We develop technology to support those giving it, not to replace it. Consumers seek speed and convenience, but that needs balancing with what’s also in their best interests – we’d hate for people to choose the wrong product quickly.

“Proceeding down this regulatory path could see unintended consequences. As I have mentioned and as Robert Sinclair of AMI says, consumers have no recourse if they self-select the wrong product. Equally, is anyone going to opt for income protection or life insurance if these products are not explained and sold?

“There’s a place in the mortgage market for brokers, lenders and self-service or execution-only mortgages, and we will be developing technology to support all of those in the interests of delivering choice for the consumer.

Personally however, I have always used an intermediary, and I always will.

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