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28 October 2004

Intermediaries in the Mortgage Market. Stijn van den Broek. 28 October 2004. Sources of market-failure in the mortgage market. Information-asymmetries: 1. complex products 2. complex contractual terms Lack of reputational effects. Market solution. Different channels:

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28 October 2004

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  1. Intermediaries in the Mortgage Market Stijn van den Broek 28 October 2004

  2. Sources of market-failure in the mortgage market • Information-asymmetries: 1. complex products 2. complex contractual terms • Lack of reputational effects

  3. Market solution • Different channels: 1. direct writing (do-it-yourself or provision of voluntary information leaflet) 2. internet (comparison-sites) 3. personal advice and intermediation

  4. Sources of market-failure in the intermediary market • lack of transparency about quality and price • lack of reputational effects • locked-in situation consumers leads to: • adverse selection (“commission-hunting”/bad advice) • moral hazard (poor after-sales service) • misselling (non-optimal advice)

  5. Market solution • Code of conduct on the provision of information on service: Gedragscode Informatieverstrekking dienstverlening Intermediair (1 Januari 2002) • Coverige (± 99%): yet still dissatisfaction among “good” intermediaries and suppliers

  6. Political context • Changes in the Act on financial intermediation: 2001 commission-refund-possibility 2002 freedom of intermediation-rewards • Financial Services Act: 1. licensing and supervision 2. duty to provide good services

  7. Misselling as a residual problem • Experiences in Engeland and the U.S.

  8. Ecorys Research • Set-up and methodology • Results

  9. Policy-alternatives • best advice • independency-label • transparency on commissions

  10. Policy-development • preconditions: 1. low administrative costs 2. low supervision costs • sector-consultation • planning (december 2004)

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