The second phase, to be carried out next year, will focus on areas where the FSA believes there is likely to be consumer detriment. The regulator will look at whether consumers are taking out appropriate and good-value mortgages and that they are being treated fairly over the life of the mortgage, including if they fall into arrears.
Robert Gordon-Walker, spokesman for the FSA, said: “The review is about whether consumers are getting the right information and are able to use it. This is not a compliance exercise and we’re not checking up on firms, but taking into special consideration the effect of regulation on people. We want to particularly focus on consumer behaviour and whether they understand the information they receive.”
The initial stage of the FSA review focused on pre-sale disclosure and firms’ advice and selling standards. It found over 75 per cent of consumers shopped around for their mortgage and used their Key Facts Illustration (KFI) to compare mortgages, in addition to considering the risks of mortgage products to decide if a mortgage was right for them.
But Kevin Paterson, managing director of Park Row Mortgages, expressed his surprise that so many people were utilising the KFI effectively, due to its complexity. He added the review would be more likely to highlight client detriment within the non-conforming market than the lifetime sector. “There are all sorts of safety nets in place for lifetime mortgages, but large chunks of non-conforming business are done through packagers, who are unregulated, but essentially giving advice to brokers. It’s very difficult for brokers to show they’ve done enough research into the best products because of this.”
