In response, the CML says that while accept that there may be a case for a review, mortgage provision in the UK already displays "many features associated with a highly efficient and competitive market". Examples include there being more than 100 active firms in the market; consumers having a wide choice of products; and borrowing costs falling and remaining at an historic low point.
Should the FCA decide to undertake a review of mortgage market competition, the CML wants to ensure that the FCA takes account of the "heavy agenda of regulatory change" already being undertaken by firms in the sector, and does not impose extra, unreasonable burdens.
The CML added that in recent years, lenders have put a lot of time and money, and considerable staff and IT resources, into ensuring that they fulfil a series of new regulatory requirements.
It also questioned whether the extended period of regulatory reform may have stifled, rather than stimulated, market competition.
The CML argued that to promote greater competition in the future, the mortgage market would now benefit for a period of stability, without any significant regulatory intervention for a while.
In fact, it said that there might be a case for modest de-regulation in some areas – or at least clarification of the rules by the FCA – to encourage more competition in the market. It suggested that the regulator could provide greater clarity where firms may feel that they are taking a risk if they opt for a liberal interpretation of the rules.
In particular, the CML said the FCA should make clear that it will not take an unnecessarily severe approach with firms over the interpretation of rules for assessing affordability for borrowers whose mortgages extend into retirement.
The same could apply to rules covering mortgage sales and advice, which have been said to discourage some firms from dealing with online and digital applications from customers.
The CML said that the effect of the rules should not be to discourage firms from dealing online with customers; instead, firms and consumers should feel free to communicate about aspects of a sale through any channel that is convenient – face-to-face, by telephone, online or through some other digital application.
In an article, the CML concluded:
"Any competition review should look carefully at the impact of regulation to see if it is discouraging this kind of flexibility. We believe that it would serve to promote competition, flexibility and choice in the market if the FCA were to ensure that the rules are applied evenly, however customers prefer to transact and service their mortgages – with or without advice, and through any communication channel that the customer and lender want to use."
