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UK FCA To Conduct A Full Review Of The Mortgage Industry

Britain's financial regulator Financial Conduct Authority (FCA) is kicking off a full-fledged review of the country’s 1.3 trillion pound mortgage market to examine if customers are getting fair treatment.

Rising housing prices along with a shortage in inventory is affecting the ability of people to buy houses and the government has been under pressure to address the situation. The FCA first started examining the sector in 2015 to see if competition could be improved in the industry. The agency announced its intention of carrying out a full study earlier this week

In a statement, Christopher Woolard, the FCA's executive director of strategy and competition said

As a mortgage is likely to be the biggest financial commitment most people make in their lifetime, we're keen to ensure that competition in the mortgage sector is healthy and working to the benefit of consumers

In its earlier report, the FCA had found that incentives paid by lenders to brokers are likely affect the quality of advice customers receive although such agreements also enable quicker and better service.

According to an industry body, the Council of Mortgage Lenders (CML), there are around 11.1 million home loans existing in the country right now of which loans worth 220 billion pounds were taken in 2015.

The FCA’s review will focus only on residential mortgages and will also be covering mortgage switching with same lender and the process of refinancing a mortgage with a new lender. Additionally it will be reviewing the nature of existing relationships between brokers, mortgage providers, lenders, comparison websites and other related services like surveyors and estate agents. Property lenders having links to lenders and brokers will also be examined.

The FCA said that it had heard of cases where customers were being forced by real estate agents to sign up with certain brokers in order to view a house. The agency will be looking at the incentives involved when lenders use in-house brokers and the impact of this arrangement on customers. According to the CML, the review would be helpful as it would be examining the entire range of relationships present in the industry and also explore the role of technology in improving services provided.

Paul Smee, CML director general pointed out that FCA’s new mortgage regulations in 2014 had had a dramatic impact on the industry and it was right of the agency to review its effect. The FCA is likely to release interim findings in summer 2017 while the final report will be out by early 2018.

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