Regulation has resulted in consumers actively shopping around for mortgages, according to the Financial Services Authority's review of the mortgage regime.
The FSA has released findings from the first stage of its review into the effectiveness of the mortgage regime, which was introduced nearly two years ago.
It reveals over 75% of consumers shop around for their mortgage and consumers are using the key facts illustration (KFI) to compare mortgages, consider the risks of mortgage products, and to decide if a mortgage is right for them.
The main focus of the review was on pre-sale disclosures, firms’ advice and selling standards to establish whether the FSA’s new conduct of business rules are delivering the intended benefits for consumers.
Dan Waters, director of the retail policy division at the FSA, says: “The review so far suggests things are moving in the right direction, although changes to consumer behaviour are likely to happen only gradually. Mortgage regulation is still relatively new and we have planned the effectiveness review in stages to identify trends and measure progress against the intended outcomes over time.”
The next stage of the review will be carried out next year and will focus on parts of the mortgage market where the FSA believes there is more likely to be consumer detriment, including lifetime mortgages and the sub prime market.
It will also look further at whether consumers are taking out suitable and good value mortgages and whether they are treated fairly over the life of the mortgage, including when they go into arrears.
John Howard, chairman of the Financial Services Consumer Panel (FSCP), says: "It is imperative that advisers comply with the rules and give [KFIs] to consumers at the right time - FSA mystery shopping research in July 2006 showed that for lifetime mortgages, approximately one third of shoppers did not receive an initial disclosure document (IDD)."
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