Bob's Blog

Customer choice has narrowed – the FCA could help fix this

02 Nov 2015

Last month what has become known as ‘the toughest job interview on television’, The Apprentice, began. For starters, I can’t honestly think of another job interview on television so it was always bound to win that accolade, which leaves me wondering what sort of competition we will witness. I’m suspecting that, much like previous years, there will be an assortment of competent people thrown together with what might politely be described as ‘wannabes’. It’s relatively entertaining and no doubt will include its fair share of good ideas thrown together with some of the most idiotic nonsense you could ever wish to see on the TV.

This type of competition appears to be a long way from the competition we all come up against in business. Our everyday working life may not be as ‘dog eat dog’ or acutely personal as that shown on The Apprentice, but there is certainly a lot to consider, a lot to overcome, and (quite frankly) a lot to worry about.

Of course competition is a fact of life and, let’s be fair, without it we would be unlikely to strive and push for greater excellence or to improve our service and product offering. Given that we are already players within the marketplace, we may well feel that it is an open road to travel in order to be active in our sector, however, this might not be the case for all. Indeed, if we think about our own business journeys to the point where we sit today, how many times did the obstacles appear insurmountable or incredibly challenging. Perhaps too much so?

Breaking down barriers

That will certainly be one of the views the Financial Conduct Authority (FCA) might wish to consider when it opens its study into mortgage market competition, and whether it is a ‘closed shop’ or ‘overly hard’ to move into this space. Certainly, for every sub-sector of the market that appears to be resplendent with lender and product choice, there will be others where the options are few and far between. Why should that be? What barriers have been raised which make this the apparent status quo?

From the perspective of a mortgage adviser,  I would be surprised not to hear any number of experiences, especially since the Mortgage Market Review has meant clients simply do not have anywhere near the choice they once had. We’re not talking about markets such as heavy sub-prime either, which have all but disappeared in the post-credit crunch fall-out, but areas which should ordinarily offer significant product choice – interest-only, lending into retirement, mortgages for the self-employed and contractors – but do not seem to do so.

A market ‘fit for purpose’

What are the reasons for this? Is market regulation, albeit needed, having an overtly detrimental effect on the ability of existing lenders to compete in these spaces? Are new offerings – banks, challengers, specialists – having to jump through too many hoops in order to bring a proposition to market? Do we simply not have the accessible funding necessary in order to develop these proposition ideas further? And when they do get to market, is there no other option but to go to the limited, specialist, higher margin product areas, as opposed to attempt a more mass-market appeal?

This review will certainly have to be wide-ranging in its brief and its deed. Especially if we are to develop a mortgage market which is not just fit for purpose now but offers choice and opportunity much further down the line. Increased competition is certainly key in that respect, and while we have seen this improve in certain parts of the market over the last 12 months, the regulator may need to play its part in helping develop a far more accessible marketplace across the board in the months and years to come.

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