The regulator believes these areas are the most likely to see consumer detriment. It will also look at whether consumers are taking out suitable and good value home loans and whether customers are treated fairly over the life of their mortgage, including if they go into arrears.
Dan Waters, director of retail policy at the FSA, said: "This next stage of the Mortgage Effectiveness Review will focus on more specialised sectors where we think there is greater risk of consumer detriment. We will also look at the treatment of customers in arrears. The findings of the review will help inform our thinking about how we might apply a more principles-based approach to our mortgage rules."
The first stage of the review last year mainly concentrated on disclosure and advice and selling practices in the prime mortgage market, where the FSA found that things were moving in the right direction, with consumers actively shopping around and with Key Facts documents helping them to understand the risks and benefits of the mortgages they take out.
Stage two of the review will include consumer research to find out more about consumers’ experience in the sectors of the market being covered. This work will be supported by analysis of relevant market data and will take account of other FSA thematic work.
The consumer and other research will be designed and research agencies commissioned shortly, and the majority of the work will be completed by the end of the year. The FSA will then analyse the findings and discuss them with stakeholders to get their input, before publishing the final report on Stage two in Q1 2008. These findings will inform any next steps for developing the mortgage regime, which will also take into account the European Commission’s forthcoming White Paper on mortgage credit.
