FSA researches sub-prime and lifetime mortgage markets

The Financial Services Authority (FSA) has published the second stage of its Mortgage Effectiveness Review, which focuses on consumer experiences in the sub-prime and lifetime mortgage sectors.

The review aims to assess whether the FSA’s mortgage conduct of business rules are delivering the intended benefits for consumers.

Sub-prime and lifetime mortgages account for less than 10% of the regulated mortgage market and while the sectors differ in nature, the FSA detected similarities in its findings.

Consumers in both markets see the Key Facts Illustration as an important and useful document for helping them to check product details and clarify uncertainties. However, they did not generally make use of the document for product comparison.

In both markets the consumers surveyed were not making a distinction between receiving advice or information-only, and the Initial Disclosure Document was not prompting them to assess the level of service they might receive.

The research also found that sub-prime borrowers relied heavily on the recommendations of brokers, as did most lifetime mortgage customers.

Both sets of consumers focused on price, with sub-prime consumers particularly concerned about the level of initial payments.

The research also covered consumer experiences of arrears handling. The results indicated a level of non-compliance and further research is being carried out in this area, with the results expected in June of this year.

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