The FCA's plans to amend its mortgage advice and selling standards "may affect the total volume of advice being given", it has admitted.
Proposed changes to the FCA's rules, announced earlier this month, would allow borrowers to engage with their mortgage provider "without the firm having to provide mortgage advice when not needed".
The FCA says the changes would "enable consumers to receive personalised information without receiving advice, if they prefer".
It believes the safeguards around execution-only sales, and the obligations of Consumer Duty, "would help ensure that consumers can make an informed choice on whether to transact without advice".
A return to execution-only sales?
New rules introduced in April 2014 following the Mortgage Market Review (MMR) prohibited execution-only sales where there is ‘interactive dialogue’. This means that, with some limited exceptions, when a firm interacts with a customer in a mortgage sale or contract variation they must give them regulated mortgage advice.
Pre-MMR, ‘non-advised’ mortgage sales using scripted questions, but with no assessment of appropriateness, accounted for a third of all sales, which led to confusion and poor-quality sales.
Since 2015, around 97% of new mortgage sales have been advised. However, the FCA says "some evidence suggests consumers may be receiving advice when they do not want or require it".
Its 2019 Mortgages Market Study concluded that its advice rules were "limiting consumer access to execution-only options more than intended" and were "constraining innovation, particularly in the use of digital channels".
The regulator says consumers who were confident choosing a mortgage "found it difficult to do so... because they were being diverted to advice and found execution-only sales channels hard to use".
It added that a comparison of consumers who bought a mortgage without advice (before the new MMR rules) and those who bought one with advice following MMR found "no significant change in specific outcomes" such as arrears, triggering an early repayment charge or entering forbearance) as a result of getting advice.
The FCA concluded that "requiring regulated advice where neither party requires it risks creating harm from a time-consuming and costly process, in addition to making it difficult for consumers to compare products between lenders and discouraging consumers from engaging with their mortgage provider".
