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Compulsory advice could benefit some borrowers, says AMI

The Association of Mortgage Intermediaries believes compulsory advice could be beneficial for some “at risk” groups of borrowers.

In its response to the FSA’s paper on distribution and disclosure, the trade body says there is a case for making advice compulsory for credit-impaired borrowers, those borrowing into retirement, and first-time buyers.

The paper looked at the mortgage sales process and the role of the seller in that process. It questioned whether or not all mortgage transactions should be on an advised basis and also put forward proposals which would result in intermediaries having a lesser role in determining affordability.

Director Robert Sinclair says the new proposals around affordability might make it difficult for borrowers to determine if they have received advice.

He says: “AMI consider that there is a strong case for making advice compulsory for all if not some ‘at risk’ groups such as the credit impaired, those borrowing into retirement, or first time buyers. The new proposals on appropriateness and affordability might make it difficult for consumers to identify the difference between the advised and non-advised processes.”

However, the Council of Mortgage Lenders and the Intermediary Mortgage Lenders Association believe customers should have a choice in whether they wish to receive advice or not

Imla believes making advice compulsory will hurt the mortgage market.

Its response says: “Consumers should be given the choice as to whether or not they have advice. There are many mortgage borrowers for whom a non-advised sales process makes good sense and delivers good outcomes. Requiring all borrowers to go through a process some do not want or need risks damaging the whole market.”

The CML says the case for compulsory advice is more “compelling” for certain types of borrowers but says consumers should have a choice.

Its response says: “We agree that consumers should continue to have the ability to choose whether or not they have advice as part of the mortgage sales process. Non-advised sales remain appropriate for a broad range of customers, and can deliver good outcomes.”


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