by Mark Johnston
Mortgage Advertising Blunders….
The very nature of financial products makes them hard to compare at the best of times, meaning that consumers are more and more reliant on accurate financial advertising.
It is hard enough at the moment for potential borrowers to work out whether a mortgage deal is good or not due to the complicated variety of rates and fees now on offer, without inaccurate adverts.
The thing is that effective advertising does encourage consumers to find out more about a particular firms products and may then in turn prompt them to buy the particular product.
Since April this year the Financial Conduct Authority (FCA) has been responsible for checking that all financial promotions are correct and accurate.
Therefore the Financial Conduct Authority (FCA) states that in regards to financial promotions businesses should make sure:
– Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups.
– Consumers are provided with clear and accurate information
So basically when buying a financial product consumers need to be clear on what they are purchasing so that they are able to make an informed choice.
Although just of late it does appear that both lenders and some home builders have been getting away with incorrect information in their subsequent advertising campagians.
A recent Post Office advert promoted a five year fixed rate mortgage at 2.63 per cent, available up to 60 per cent loan to value (LTV). After the fixed rate expires, the mortgage reverts to a tracker with the revert to rate stated as 4.49 per cent, which is described as ‘Bank of England base rate plus 3.9 per cent’.
However, Ray Boulger of mortgage broker John Charcol, says “When I went to school 0.5 per cent plus 3.9 per cent used to equal 4.4 per cent. Therefore either the revert-to rate of 4.49 per cent should be 4.4 per cent and the Post Office is quoting the wrong margin over bank rate or it thinks bank rate is at 0.59 per cent”.
Although a Post Office spokesperson has since apologies for any confusion caused by the ‘rate error.’
Fairview New Homes advertised one-bed flats from £152,995. The advert claimed that with a 5 per cent deposit and 20 per cent equity loan via Help To Buy, mortgage payments on the property would be ‘just £428 a month’ assuming a mortgage with an ‘amazing’ APR of 2.74 per cent.
Rules about financial promotions state adverts are only allowed to mention interest rates currently on the market and at the moment there is not a first time buyer mortgage with an annual percentage rate (APR) of 2.74 per cent available.
The Financial Conduct Authority (FCA) has refused to comment on individual adverts but they have stated that financial promotions should be ‘fair, clear and not misleading’.
Therefore it does seem that mortgage advert blunders such as these are making comparing home loans an even tougher task!
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