A Ban on Non Advised Mortgage Sales

by Mark Johnston

The Financial Service Authority (FSA) has very recently announced plans in the form of a mortgage market review (MMR), to prevent a return to risky mortgage lending seen during the housing boom.

Irresponsible lending resulted in many borrowers taking on mortgages which only seemed affordable on the assumption that house prices would always rise.

With the financial crisis and the economic climate as it is today, many of these borrowers have now ended up struggling to repay their mortgages and are therefore in real danger of losing their homes.

The Financial Service Authority’s (FSA) mortgage market review (MMR) proposals will see that all prospective borrowers will now receive the right advice and information at the right time. It will also ensure all mortgage lenders will be properly checking each individual applicants ‘realistic’ ability to repay their mortgage.

Taking mortgage advice will also become compulsory for ‘vulnerable consumers’ i.e. those who are taking out equity release deals, sale and rent back loans or those who are taking on extra borrowing as part of debt consolidation.

The mortgage market review (MMR) proposes to ‘do away’ with non advised mortgage sales.

Around 30% of mortgage sales are none advised, but many consumers do not understand the distinction in the service they are receiving.

Many experts believe that for far too long lenders have blurred the lines between advice and information when dealing with customers.

Under the new proposals all advisers must consider if a mortgage product is suitable and affordable for each customer individually, rather than simply providing information on products.

Research has shown that most consumers believe that if they speak to an intermediary, they have been given advice no matter how many times they may have been told that they are just being given information not advice.

A few big of the lenders are less than happy with the Financial Service Authority’s (FSA) new proposals as they believe that these plans will drive more business to brokers. Many also feel that they may struggle to get all of their bank based advisers, telephone advisers and internet advisers trained to the required level.

So it seems that many lenders are unhappy that their staff will have to gain appropriate qualifications in order to advise clients. Is this not what customers expect to receive anyway when being helped to arrange often the biggest financial commitment of their lives.

Paul McMillan, editor of money marketing feels that “the FSA must ignore the pleading of certain big lenders and stick to their ‘guns’ over its non advised sales ban. Consumers deserve the protection and service that comes from receiving advice from qualified and competent individuals”.

Rob Sinclair, director of the Association of Mortgage Intermediaries (AMI), stated “I think the recognition that advice is the right way to go for such complex transactions is a positive step forward”.

These particular mortgage market review (MMR) proposals will ensure that many more consumers are given the support and guidance they need to make better and more informed decisions when applying for a mortgage.

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