FCA asks for views on competition issues in mortgage sector

The FCA is trying to identify where competition is not working well or could be improved, it said in a statement. Stakeholders are asked to send their views on any factors that might affect competition in the sector. The scope of the inquiry covers lifetime mortgages, shared ownership, buy-to-let, second charge mortgages and bridging loans. 

Christopher Woolard, director of strategy and competition at the FCA, said: "For millions of consumers a mortgage is one of the biggest, if not the biggest, financial transaction they will enter into in their lifetime. The mortgage sector also plays a vital role in the financial services industry and many areas of the economy."

"Competition can play a key role in ensuring that the sector works well, delivering consumer benefits through lower prices, better customer service, and more product choice," he said.

Competition law expert Robert Eriksson of Pinsent Masons, the law firm behind Out-Law.com said: "If the FCA identifies competition issues, it could refer the sector to the Competition and Markets Authority (CMA) for an in-depth market investigation or take other regulatory action.  Given the broad powers of the FCA and the CMA, potential remedies could have far-reaching implications."

The FCA is interested in a range of factors that might affect competition in the provision of loans secured against a property, whether regulated or unregulated.

These factors could be as a result of the regulatory regime, or any other barriers to entry, expansion or innovation, the FCA said. They could also relate to consumers' ability to access, assess or act on information. These factors are similar to those considered in the current retail banking market investigation and other studies in the wider financial services sector, Erikkson said.

"These factors might be affected by changes in the economic environment or changes to the regulatory framework. We welcome comments on how this should inform the scope and timing of any future market study or further FCA work," the FCA said.

The FCA is keen on inputs regarding mortgage firms' conduct and relationships, it said. The provision of mortgage products is "characterised by a number of complex relationships", some of which are key to mortgage/house purchasing transactions and fall outside the FCA’s traditional regulatory remit, including third party administrators, packagers, and surveyors, it said.

"We are interested in how these activities or relationships might affect competition, for instance by affecting entry, expansion, and/or the ability of consumers to make effective mortgage choices," the FCA said.

The FCA therefore welcomes views on the activities of, and relationships between: businesses within the mortgage supply chain, such as lenders, price comparison websites and brokers; businesses providing input or services to the supply chain, including mortgage sourcing systems and sources of funding); and businesses in related sectors such as valuation services and estate agents, it said.

The call for inputs will close on 18 December. A statement will be published in the first quarter of 2016 outlining responses and confirming any further action, the FCA said.

As of 1 April the FCA has concurrent competition law powers with the CMA, including the ability to take enforcement action for breach of EU and UK competition law. It published final guidance on its use of these powers in July, along with associated changes to the FCA handbook, which clarified that it requires firms to report significant competition law infringements to the FCA. 

Eriksson said: "While market studies are not intended to focus on the conduct of individual firms under the Competition Act, firms should be aware that the FCA can use information it obtains in a market study to launch Competition Act investigations at a later stage."