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Intermediaries expect increase in direct selling

Nearly a quarter (23%) of mortgage intermediaries expect that consumers will choose to bypass advice and arrange their mortgage directly with a lender if the FCA’s proposals to remove prescriptive requirements around firms’ execution-only policies are implemented, according to Paragon’s latest quarterly Financial Adviser Confidence Tracking (FACT) Survey of 200 of the UK’s largest mortgage intermediaries.

The FCA’s proposals, published in May this year, are one part of a package of remedies arising out of the Mortgage Market Study, which aims to encourage innovation and make it easier for consumers to find the right product.

Advised mortgage sales increased from 70% to 97% of mortgage business following the Mortgage Market Review in 2014, when rules were introduced to improve clarity for consumers over whether their mortgage sale was subject to advice or not.

By confirming that search and filtering tools will not necessarily constitute advice and raising the trigger points at which firms need to divert customers from an execution-only to an advised channel, the FCA believe that a better balance can be achieved.

Among those brokers who expect the FCA proposals to lead to an increase in direct business, 44% believe the impact on their own business will be significant and 36% think it will present a threat to the broker market.

However, over half of intermediaries surveyed (55%) expect the impact of the changes will be minimal, perhaps indicating a belief that consumers are likely to continue to seek advice before making such a significant financial commitment. One in seven surveyed (15%) plan to adapt their business models to accommodate the change.

The FCA’s “Consultation on mortgage advice and selling standards” closed on 7 July and is expected to result in a new Policy Statement in late 2019.

John Heron, Managing Director of Mortgages at Paragon said:

The mortgage market is set for significant change as technological advances streamline routine processes and make inroads into product comparison and selection. However, choosing a mortgage is a major financial decision and advice can be critical in helping customers look beyond the headline interest rate to understand the full cost and benefits of alternative products. Advice is also essential when arriving at an optimum solution for customers with complex requirements.

For more information on current trends in the UK mortgage market, view the FACT Q2 2019 report.

30 July 2019

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551