Mortgage Effectiveness Review: focusing on higher risk areas
10 Apr 2007 11:37 AM
The Financial Services Authority (FSA) announced today that the second
stage of its review of the effectiveness of its mortgage regime will focus on
areas where the risk of consumer detriment may be higher, such as sub-prime and
lifetime mortgages.
It will also look at whether
consumers are taking out suitable and good value home loans and whether
customers are treated fairly over the life of their mortgage, including if they
go into arrears.
Dan Waters, FSA Director of
Retail Policy, said:
"This next stage of the Mortgage Effectiveness Review will focus on
more specialised sectors where we think there is greater risk of consumer
detriment. We will also look at the treatment of customers in
arrears. The findings of the review will help inform our thinking about
how we might apply a more principles-based approach to our mortgage
rules."
The first stage of the review last year
mainly concentrated on disclosure and advice and selling practices in the prime
mortgage market, where the FSA found that things were moving in the right
direction, with consumers actively shopping around and with Key Facts documents
helping them to understand the risks and benefits of the mortgages they take
out.
Stage 2 of the review will include
consumer research to find out more about consumers’ experience in the
sectors of the market being covered. This work will be supported by
analysis of relevant market data and will take account of other FSA thematic
work.
The consumer and other research will be
designed and research agencies commissioned shortly, and the majority of the
work will be completed by the end of the year. The FSA will then analyse
the findings and discuss them with stakeholders to get their input, before
publishing the final report on Stage 2 in Q1 2008. These findings will
inform any next steps for developing the mortgage regime,
which will also take into account the European
Commission’s forthcoming White Paper on mortgage credit.
NOTES FOR EDITORS
1. The
outcome of Stage 1 of the Review is described in FSA Pres
s Notice 96/2006.
2. The Mortgage Review is one of the FSA's
post-implementation reviews of policy interventions in retail markets, which
form part of its work on better regulation. The purpose is to evaluate the
effectiveness of the Mortgages: Conduct of Business (MCOB) rules against the
intended consumer outcomes:
Outcome 1: Consumers shop around for
mortgages;
Outcome 2:
Consumers understand whether they are being given advice or information by
firms;
Outcome 3:
Consumers better understand the risks and features of the mortgages they take
out, including affordability risks;
Outcome 4: Consumers take out suitable and good value
mortgages;
Outcome 5:
Consumers are treated fairly over the life of the mortgage, including when they
go into arrears.
3. Stage 1 focused on the first three
outcomes and partially on Outcome 4. Stage Two will be looking at all five
outcomes with a focus on areas with a higher risk of consumer detriment.
4. In parallel with the
Mortgage Review, the FSA is also reviewing the effectiveness of its General
Insurance regulatory regime. More information about progress on this can
be found in FSA Pres
s Notice 27/2007.
5. The FSA took on responsibility for
mortgage regulation on 31 October 2004 and for general insurance regulation on
14 January 2005.
6. The FSA regulates the financial
services industry and has four objectives under the Financial Services and
Markets Act 2000: maintaining market confidence; promoting public
understanding of the financial system; securing the appropriate degree of
protection for consumers; and fighting financial crime.
7. The FSA
aims to promote efficient, orderly and fair markets, help retail consumers
achieve a fair deal and improve its business capability and
effectiveness.
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Gordon-Walker
020 7066 3232
Outside
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