TR15/9: Embedding the Mortgage Market Review: Advice and Distribution

This report summarises the key findings of our thematic review of the quality and suitability of mortgage advice provided by firms following implementation of the Mortgage Market Review (MMR).

Thematic review TR15/9 [PDF]

This report should be read in conjunction with ESRO’s independent customer research report Understanding consumer expectations of the mortgage sales process.

The two publications consider customers’ experience of receiving advice and the extent to which firms are recommending mortgages which are suitable for customers’ individual needs and circumstances.

We also highlight areas where firms may need to take steps to improve practices including oversight arrangements to ensure that advisers treat customers fairly and act in their best interests when recommending suitable mortgages.

Who should read this?

Our findings will primarily be of interest to mortgage lenders and intermediaries. Consumer groups and trade bodies will also be interested in the themes explored in this report.

What was our scope?

We assessed the quality and suitability of mortgage advice provided by firms using a range of tools, including mystery shopping, file reviews, on-site visits and qualitative consumer research. We also assessed a small number of examples of more complex or specialist advice.  

What did we find?

Some firms were engaging customers in focused, relevant, discussions leading to suitable recommendations with good rationale. However, overall, the quality of advice in the mortgage market was mixed:

  • Some firms delivered advice with little or no structure meaning advisers typically failed to ensure they had sufficient understanding of customers’ needs and circumstances on which to base their recommendations.
  • Other firms placed heavy reliance on completion of point-of-sale application systems, allowing little flexibility for advisers to apply judgement or adapt delivery to meet individual customers’ needs.

Both approaches resulted in unintended consequences which impacted on the customer experience or the suitability of recommendations provided.

What are the next steps?

We will continue to engage with industry to address the issues identified. We have provided individual feedback to firms visited as part of our assessment, setting out any actions required as a result of our findings.

Our review of advice and distribution forms part of our wider programme of mortgages work. We commenced our review into responsible lending in April 2015 and will continue our assessment of how firms are implementing our post-MMR rules.

Building on this, from autumn 2015 we will begin a wider assessment of barriers to competition, with a view to launching a market study in early 2016 on those aspects of the mortgage market that are not working to the benefit of consumers.

More information

Read our MMR pages