Mortgage Market Competition

Mortgage Market Competition.

The Financial Conduct Authority (FCA) has today launched a market study to consider whether competition in the mortgage sector can be improved to benefit consumers.

The FCA wants to understand whether consumers are empowered to choose on an informed basis between products and services and are in a position to understand whether these represent good value for money.

The market study will explore two questions:

At each stage of the mortgage process:

• Do the available tools (including advice) help mortgage clients make effective decisions?
• Do commercial arrangements between lenders, brokers and other players lead to conflicts of interest or misaligned incentives to the detriment of clients?

The FCA will also review whether there are opportunities for better technological solutions to problems we identify, including greater use of digital channels to deliver information or advice.

Comment

Competition is a natural market influencer.  The issue is that bankers, not just in UK and US but in many other countries (look at Italian Banks today), have made poor lending decisions to compete.  Offering better comparison tools will not necessarily improve competition, but if it does, it could also apply further pressure on the capital adequacy of any bank.  It was just a couple of weeks ago that 3 UK failed the Bank of England’s new stress tests.