The FCA has published a review of mortgage lending strategies, emphasising that customers’ needs must be at the heart of the process.
The review, Governance over mortgage lending strategies, assessed the quality of firms’ governance from a conduct perspective when setting or amending lending strategies.
Many lenders are trying to develop their mortgage lending and increase their market share in a more competitive environment. The FCA believes that in the midst of the current product innovation, lenders should not lose sight of the end customer and the potential risk of the product or service to them.
Commenting, the FCA said: “Since we became the FCA, we have seen executive management and boards becoming more explicit in the way they engage with the concepts of conduct and customer focus.
“Through our thematic work, we wanted to understand how this translates into the development of new lending strategies at a time when many lenders are innovating and adapting in the face of market pressures and changes to regulation.”
The review included 10 regulated firms in the form of banks, building societies and smaller niche lenders.
It found there was a wide range of governance structures and practices within firms when setting mortgage-lending strategies – but an ‘inconsistency’ in the way providers are thinking about the impact of these strategies on consumers.
The FCA believes that more can – and should – be done to focus on customer outcomes and experience and stressed that providers need to make sure that everyone within their organisation understands the importance of this.
The FCA said: “We believe it is right that firms should tailor their approach in an appropriate way for their business.
“However, within the variety of approaches adopted by firms, our focus is to assess whether they are considering the risks to customer outcomes in their decision-making processes.
“In particular, we want firms to recognise that effective governance means considering the customer throughout all stages of strategy formulation and delivery.”
The review and the FCA’s suggestions to providers can be found on its website.