Could the FCA's approach to mortgage switching rear-end the advice sector?

It started long ago but most recently we stopped at a place called ‘execution-only’ and, within two weeks, we have moved onto a town called ‘mortgage switching’.

You might think that this is a journey where the FCA travels forwards but its most recent utterances on the mortgage market appear to evidence that it’s currently firmly in reverse, flooring the accelerator and therefore likely to rear-end the entire sector at any given time.

Just this month, the regulator published research on ‘mortgage switching’ – essentially that research has revealed a great swathe of existing borrowers who stay with their existing lender, presumably on their SVR, and never move mortgages at all. Understandably, the FCA is concerned that large numbers are effectively paying over the odds for their mortgage and they’ve asked these borrowers why they don’t switch and what would encourage them to switch.

The FCA admits there are all manner of reasons why mortgage borrowers don’t switch but there tend to certain shared characteristics – they’re older, they earn less income, they’re more likely to be single borrowers, they live in less affluent areas, they have ‘blind’ brand loyalty to their existing lender and [HOLD THE FRONT PAGE] they are less likely to have used a mortgage adviser to arrange their original mortgage.

So, what might the FCA do next? After all, it’s now said that there is a case for intervention here in order to help borrowers switch. It wants to engage consumers in the switching process, set out the case for switching and give individuals enough of the right information. You’ll sense a theme here and may even believe there are a group of professionals who already make a living out of doing this.

Yes, lo and behold, it occurs to us that the FCA could readily and easily do this by encouraging consumers to use mortgage advisers because, as their own research reveals, borrowers are much more likely to switch if they’ve got their original mortgage from an adviser.

We fully await the FCA to jump in their vehicle and follow this route then... except we perhaps shouldn’t hold our breaths, because as we all know, at the very same time, the FCA has pursued a narrative over the past few years which says that securing mortgage advice adds nothing to the experience of the consumer, that they could actually get the same product, cheaper, by going direct, and that the best way to get people the mortgages they need is to allow them to choose their own via execution-only channels.

We freely admit it’s easy to sound a little hysterical about this but when you consider that the FCA appears to be approaching mortgage borrowers in such a schizophrenic manner, you might understand why a little hysteria is setting in.

It’s no wonder that within the mortgage advice community we are all currently left scratching our heads in bemusement. The very channel that can be relied upon most to ensure that a) consumers get the right mortgage, and b) that they continue to get the right mortgage, is the very one that the FCA has spent two years disparaging to a point where it has rowed back on the Mortgages Market Study which suggested that advice was the most appropriate route to take for the vast majority of consumers in the first place.

You would struggle to make this up, and no doubt those at the FCA responsible for the mortgage market would opine that it is far more complicated than we are making this out to be. It’s not. Advice is by far the best option for the vast majority of borrowers and it will result in far more consumers switching when appropriate and not spending their mortgage lives overpaying for the privilege.

That’s the end destination that we can all see – it’s a shame the regulator can’t and continues to scan the road by looking in its rear-view mirror.