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Be best of a rare breed

It is perhaps a peculiarity of the UK financial legislative structure that mortgages have never been the subject of dedicated regulation.

While sales of the peripheral investment products such as endowments are regulated, dedicated mortgage advisers have escaped the legislative net.

Self-regulation in the form of a voluntary code of practice was found wanting on the part of both lenders and intermediaries. But after Parliamentary scrutiny, all this will soon be giving way to the “full Monty”.

The Mortgage Code Compliance Board has indicated that its target date for all mortgage intermediaries to be fully qualified is from the end of 2001 but it believes the consultation with the FSA will push that back into 2002.

Qualification would take the form of two exams – the standard FPC qualification together with a specialist mortgage qualification, either Maq or Cemap. The Maq qualification is a more specific mortgage paper, with Cemap being a more general paper.

Costs to the intermediary in obtaining these qualifications may be significant although the cost of not getting these qualifications is even greater. The fear is that the number of intermediaries will drop significantly following the introduction of qualification requirements.

Many dedicated mortgage intermediaries work alongside IFAs and life companies to give specialist advice direct to the consumer. The FPC qualification, which becomes mandatory, is not relevant in these situations. Yet this valuable specialist mortgage knowledge can only be to the benefit of the consumer. Other professions in the UK allow for specialisation, why not the mortgage industry?

Who would benefit from a reduced number of mortgage IFAs? Certainly not the consumer.

Contemporary lenders with no branch networks could be significantly affected, enough to warrant these lenders entering a scramble to secure effective distribution.

Lenders have been able to build substantial mortgage asset bases without the cost of a branch network by lending through the intermediary market. While relatively low-level introductory fees have been paid, it is questionable, given the current market conditions, whether intermediaries are being adequately compensated. Perhaps the time is right to introduce a minimum fee benchmark for all intermediary-introduced mortgages which adequately reflects the comparative cost of acquisition.

Some lenders, despite having spent vast sums on TV and other media, remain predominantly reliant on intermediary distribution, hav-ing not diversified their distribution channels to encompass a direct brand.

The last 18 months have seen the acquisition of the biggest mortgage IFA, John Charcol, by Bradford & Bingley and the biggest mortgage packager, Private Label, by GMAC.

While still in their relative infancy, the advent of mortgage websites will undoubtedly have a major impact on future mortgage distribution. Currently, some 1 to 2 per cent of all mortgages are sourced via the internet. This figure is predicted to rise to 15 per cent in the next three years.

But while the internet enables the consumer to get mortgage information far more easily than ever before, very few websites at present offer everything needed by the consumer and the accuracy or code-compliant quality of this information is debatable.

Some legal pundits have argued that internet portals are not regulated by the mortgage code yet some consumers are relying on these for information, if not advice and recommendation. Many websites feature best-buy tables and lenders are accepting mortgage applications via these sources.

These websites are acting in a similar way to intermediaries giving information-only levels of service and, in some cases, are also getting fees from lenders. It is therefore essential that intermediaries (and lenders) ensure their web presence is as code-compliant as any other part of their business.

There is a strong case for the mortgage intermediary gaining a significant market-ing advantage by making sure that online showcase is just that – a superb cost-eff-ective showcase and probably the greatest marketing tool ever.


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