Lenders Offering Mortgage Advice

by Mark Johnston

46% of Britons recently surveyed felt mortgage advice was essential, but who should provide them with this?

A mortgage is a complicated financial instrument that is often taken over a long period of time and it is surrounded by numerous issues such as the quality of the security, the debt serviceability, the credit worthiness of the applicant and so on.

In the UK market, around 50% of consumers who buy their mortgage directly from a lender benefit from that lender providing advice on the best product in their range.

Many experts believe that banks should not offer advice as they are biased as they only sell their own products and do not have any knowledge of anything but their own products and are therefore are not capable of offering independent advice.

Some also think that the advice process should be totally independent of product providers, imagine a world where a GP can only prescribe the medication from one Drug Company, it is much the same.

Other experts suggest that lenders should be allowed to give advice providing that it is explained that the advice is based upon their limited products. Many have seen customers who have taken a product supplied by their bank believing they have been advised to take it, only to find out later when it is not the right thing for them that the lender is not accountable because they have only provided information.

Evidence has showed that for a significant number of people the advice they were given was poor and as a result they have quickly fallen in to debt.

Clive Briault, managing director of retail markets at the financial service authority (FSA) said “it is crucial that customer’s needs are assessed properly, including whether borrowers can afford the mortgages they are being offered”.

Rosalind Pearson, from citizen’s advice added “lenders have a responsibility to do everything they can to ensure the loans they are offering people are affordable from the outset”.

Although with in the banking world its advisors agree that they need to ensure that their clients are aware that they are only able to advice from their own products and some even suggest that they would direct customers to an independent advisor if they felt they could not meet the customer’s needs.

The financial services authority (FSA) reviewed 252 firms of different sizes to establish a baseline of which advice is given. They then called on firms giving mortgage advice to drastically improve their processes after findings show that of firms they sampled only one third had robust processes in place to provide customers with suitable advice.

The FSA however denied that its findings showed widespread mis-selling of mortgages, only that lenders must get the procedures right so they can prove they have given good advice.

Consumers can however still opt for whole market advice, an option which statistics show is taken up by more UK consumers than in any other member state. Consumers have benefited from independent advice immensely over recent years.

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