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The Financial Conduct Authority on Wednesday said it was seeking to identify areas where competition may not be working well, including in lenders’ behaviour, consumers’ ability to access suitable home loans and the impact of the Mortgage Market Review — measures it introduced last year that have tightened the rules on affordability.
The FCA’s call for views is a prelude to a potential full-blown market study, which the FCA has previously said will begin in 2016. These studies are sweeping, industry-wide inquiries that can lead to changes ordered to business practice — even if there has been no technical breach of competition law. They can also lay the ground for enforcement investigations, where companies can be fined as much as 30 per cent of global turnover in a particular market if wrongdoing is proven.
The FCA’s mortgage market study would be the second major competition inquiry open into the banking sector — the FCA only gained competition powers earlier this year — after the regulator’s continuing probe into competition in wholesale banking.
The broad scope of the FCA’s review, encompassing the entire mortgage market from conventional loans to equity release and the unregulated buy-to-let sector, suggested it was leaving no options off the table in assessing the state of competition.
The FCA said that MMR had constrained some borrowers’ ability to obtain certain types of home loan or reduced the size of loan they could take out. There was anecdotal evidence, it said, that some types of consumers were becoming unfairly trapped and unable to access more suitable deals and it would look at how prevalent the problem was.
The FCA will also seek input on whether companies have too much or too little market power and whether they influence the market through “tacit” co-ordination rather than explicit collusion. “Co-ordination can reduce competitive tension between firms,” it said. Six lenders account for 80 per cent of mortgage lending business.
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