The independent analysis of 44 KFIs provided by 22 mortgage firms follows reports of excessively long KFIs introduced as part of 'Conduct of Business' regulation of mortgage providers by the Financial Services Authority, which came into force on 1 October 2004. The objectives of the research were four-fold:
* to identify how firms are adopting the rules and guidance for KFIs in practice;
* to identify areas where the output may not be easy for consumers to understand;
* to identify areas of non-compliance with FSA requirements;
* and to identify the characteristics of a "best of breed" KFI - something that Beachcroft Wansbroughs Consulting has subsequently developed.
It is made clear that borrowers can only compare offers of the same type, repayment or interest only. However, Beachcroft Wansbroughs Consulting concluded that the objective of enabling borrowers to compare mortgage offers of the same type may only work to a limited extent.
The study also found that:
* The cost of a mortgage measured by the FSA's concept of 'total payments per £ of loan' may be confusing as there is a danger that it will give a different measure of the cost of mortgage to APR;
* 'Plain English' would improve many documents, with language simplified to avoid the use of jargon such as 'portable';
* Some of the FSA rules may need modest changes which could be achieved through its Quarterly Consultation Paper process. Some rules would be better re-designated as guidance;
* Highlighting would be better used on the key information, rather than the headings.
Ian Reynolds, consultant at Beachcroft Wansbroughs Consulting, comments: "In a market with an enormous variety of products, the FSA has done a good job of setting out the key information that a consumer needs to decide whether mortgage is suitable for them. However, we believe the Conduct of Business rules could be amended to better meet the FSA's objectives of setting out information that is 'clear, fair and not misleading', and remembering that it is KEY, rather than comprehensive, information that is required. This would make them easier for consumers to understand."
