Lenders expect few execution-only mortgage transactions

Barclays, Aldermore and Virgin Money say they expect execution-only mortgage sales will become a niche area of the market following the mortgage market review.

Last month, the FSA published its final MMR rules.

During the consultation, the regulator proposed a ban on all non-advised sales where there was any form of “interactive dialogue” between a customer and a lender. However the final rules allow for execution-only transactions for contract variations like changing the payment method, rate switches and retention deals or porting the mortgage. High-net-worth individuals, which the FSA defines as having a net income of £300,000 a year or more, can obtain a mortgage without advice.

Speaking at the Mortgage Business Expo in London last week, FSA mortgage policy manager Lynda Blackwell admitted the regulator is concerned that lenders might force borrowers down the execution-only route. She said: “We are concerned that it could be misused so firms must keep evidence that customers who have been offered execution-only meet the requirements.”

The FSA estimates around 70 per cent of sales are currently advised.

However lenders said execution-only sales will only make up a small proportion of transactions after the MMR rules come into play in April 2014.

Aldermore managing director of residential mortgages Charles Haresnape said: “Execution-only will account for a single digit percentage in terms of sales. It will be mainly for professional people but, even then, some of these people will want advice.”

Virgin Money intermediary sales director Richard Tugwell said: “The MMR has ensured the public starts to become aware of the benefits of advice, so intermediaries can only benefit. Execution-only has become more of a niche area of the market.”

Barclays head of national relationships Sarah Green said: “Execution-only is still available for some customers but I think that will be a limited option.”