2018年-FCA英国金融行为监管局_occasional_paper_35_43页_2mb

Summary of "Six of One…? Choice of Intermediary in the UK Mortgage Market"

Core Content

This paper investigates the variation in mortgage prices across different intermediaries in the UK mortgage market and explores the potential drivers behind this variation. The findings contribute to the FCA's Mortgage Market Study by providing insights into how intermediary choices affect mortgage pricing and whether these choices are influenced by procurement fees or the number of lenders used.

Main Findings

• Price Variation Across Intermediaries: The average price of similar mortgage products for like-for-like borrowers varies significantly across intermediaries. The difference in the average mortgage price is about 27 basis points, which could mean a consumer pays £800 more over the two-year introductory rate period for the median loan amount.

• No Strong Link Between Procurement Fees and Mortgage Prices: There is little evidence that intermediaries selling more expensive mortgages also receive higher procurement fees. While some specialist lenders pay higher fees, this does not consistently correlate with higher mortgage prices. The dispersion of procurement fees is small, with a difference of around 0.08% between the 10th and 90th percentile, resulting in a gross difference of less than £120 for the median loan amount.

• Fewer Lenders = More Expensive Mortgages: Intermediaries that use fewer, familiar lenders tend to sell more expensive mortgage products on average. Conversely, those using a larger number of lenders sell cheaper products. This is attributed to either reduced search costs or a higher risk of rejection when using fewer lenders, which may lead to higher prices as a trade-off.

Key Drivers of Price Variation

The paper identifies two key potential drivers of price variation:

1. Procurement Fees: These are the commissions paid by lenders to intermediaries for each mortgage sold. The fees are typically a percentage of the loan amount and are agreed between the intermediary and the lender. However, the study finds that higher procurement fees do not consistently lead to higher mortgage prices.

2. Number of Lenders Used by Intermediaries: The number of lenders an intermediary uses is a significant factor in mortgage pricing. Using more lenders is associated with lower average mortgage prices, while using fewer lenders is associated with higher prices.

Methodology and Data

• The study uses a transactional-level dataset covering mortgage transactions from January 2014 to June 2016.

• Data sources include:

  • Product Sales Data 001 (PSD001): A regulatory dataset collected by the FCA.
  • MoneyFacts dataset: Provides additional product characteristics.
  • Credit reference dataset: Includes borrower credit scores and history.
  • Financial Services Register: Offers information on intermediaries' authorisation status.
  • HM Land Registry: Provides property-related data such as whether the property is a new build or older.

• The Annual Percentage Rate of Charge (APRC) is used as the price measure, which includes both the interest rate and fees. The analysis focuses on the initial incentivised rate period and the mortgage term.

Sample Construction

• The sample is limited to intermediated mortgages, which accounted for around 67% of the market in 2016.
• Excluded mortgage types include equity release, bridging loans, business loans, high net worth mortgages, offset mortgages, shared ownership, low start mortgages, self-build mortgages, shared appreciation mortgages, and guarantor mortgages.
• The analysis is restricted to:
  • First Time Buyers, Home Movers, and Remortgagors.
  • Capital and interest repayment mortgages, which account for over 96% of all transactions.
  • Mortgages with a two-year fixed rate period, which make up the majority of the market (around 81% of all mortgages sold in 2016).

Limitations

• The study focuses on the price paid by borrowers, not on the suitability of the mortgage product.
• The analysis assumes that fees are rolled-up over the life of the loan.
• The findings may not fully capture the unobservable borrower characteristics that could influence intermediary choices.

Conclusion

The paper highlights the importance of intermediary choice in mortgage pricing and suggests that the number of lenders used by intermediaries is a more significant determinant of price than procurement fees. It also underscores the need for better information for consumers to make informed decisions about intermediaries and mortgage products.