FCA has published its portfolio supervision letter to mortgage intermediaries. It notes that mortgage intermediaries range from sole advisers to large networks, and that most focus on mainstream mortgages but some specialise in niche activities.
FCA notes the conclusions of the Mortgages Market Study that the market works well in many respects, and explains what it did to address the potential consumer harms the study found. Now, the rules make it easier for firms to present options to customers without giving regulated advice, and reduce regulatory barriers to help consumers get the right mortgage. The main potential harms it now sees are:
- advising customers to get an unsuitable product that does not meet their needs;
- customers paying excessive fees and charges or being unclear about what they are paying; and
- fraud risks.
FCA will be focusing its supervisory work on second charge and lifetime mortgages – drilling down on suitability and appropriateness of the product and, specifically for lifetime mortgages on the personalisation of advice.
More generally, to help combat mortgage fraud, FCA notes that firms running large operations should do appropriate due diligence on advisers, ARs and introducers, and that firms must ensure they stay aware of cyber risks. This leads to governance responsibilities such as having enough resource to supervise advisers and ARs.
The letter mentions trading names – and stresses that while firms may add trading names to the register, they may not add a separate and independent unauthorised firm as a trading name and allow it to carry out a regulated activity.
Finally, the letter reminds firms to be prepared for the SMCR deadlines, and for Brexit.