FCA to include product transfers in mortgage reporting requirements

In a consultation paper released today, the PRA and the FCA say they have identified a number of areas where they believe further data are needed from firms.

Alongside sales reports on product transfers and further advances (including LTI flows), the regulators want to collect performance data about mortgage books that have been sold to unregulated entities.

It also wants second charge administrators submit an additional form in MLAR on the number and value of loans they administer.

Lenders and administrators are required to submit regular reports to the FCA to help identify potential harm to consumers and to support wider thematic work and competition studies.

The FCA also shares these data with the Bank of England and the PRA to the considerations of the Financial Policy Committee.

In its Paper, the FCA and PRA say recent data shows that approximately 42% of mortgage sales are now internal product transfers.

Industry experts, including the AMI, have been calling for product transfer data to be included in analysis, arguing that non-advised product transfers carried out by lenders are doing "great damage" to the promotion of advice.

Speaking at last year's FSE Manchester, AMI’s Robert Sinclair added that this ‘hidden bit’ of the market was still unknown, and therefore the advisory profession could not truly know how much of this market was being lost.

The FCA agreed today that without this data, its ability to understand possible conduct and competition harms in the mortgage market is limited. The Interim Report stated that the FCA would consider consulting on collecting this information in the coming months.

The regulator added that the number of accounts in mortgage books owned by unauthorised firms is expected to increase as lenders continue to sell on mortgage books and the sale of assets of lenders that failed during the financial crisis continues.

It admitted it does not currently know how these mortgages are performing in the way that it does for other loans, as it is the authorised lender which is required to submit reports on the performance of the individual loan, not the administrator.

The FCA said it appreciates that "changes to reporting systems can be costly for firms" and is consulting on the proposals as a package to limit the frequency of changes.