The Financial Services Authority (FSA) has confirmed it is to take a greater look into the lifetime and non-conforming markets in the second stage of its review into the effectiveness of mortgage regulation.
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. 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 to decide if a mortgage was appropriate.
But Kevin Paterson, managing director of Park Row Mortgages, said the review would highlight more client detriment within the non-conforming market than the lifetime sector. “There are 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.”
