The European Commission is considering whether to make advice compulsory for all mortgage sales or for certain types of mortgage customers.
The EC is formulating proposals for a mortgage credit directive which will look to ensure responsible lending and borrowing across Europe, with proposals due to be published early this year.
Association of Mortgage Intermediaries director Robert Sinclair says: “The discussions on the European mortgage directive on responsible lending and borrowing are continuing, with debate as wide ranging as whether or not all mortgages should be advised or whether certain types of mortgage customers should always receive advice.”
Sinclair says consumers likely to be considered as needing advice by the EC may include first-time buyers, those in arrears and interest-only borrowers.
In a speech in November, FSA director of conduct policy Sheila Nicoll said around 30 per cent of mortgages are currently non-advised. She said the FSA would retain the non-advised sales route as part of the mortgage market review but raised concerns about customers not realising the distinction between advised and non-advised sales.
First Action Finance head of communications Jonathan Cornell says: “I think it would be a great move. If you look at the UK mortgage market, there are an awful lot of mortgages sold on a non-advised basis. Mortgages are a complex product and if people get it wrong, the consequences are huge.”
In last week’s product intervention paper, the FSA suggested it may ban non-advised sales for complex products or where consumer detriment risk is high. The EC is consulting on whether execution-only should be banned or tightened up for investment advice under Mifid.
A Council of Mortgage Lenders spokeswoman says: “In principle, we would prefer to see a more permissive regime rather than a restrictive one.”