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FSA to ban non-advised mortgage sales

The FSA is proposing to ban most non-advised sales where there is a “spoken or other interactive dialogue” between a customer and a firm.

Under new proposals published today, all advisers must consider if a mortgage product is suitable and affordable for the customer, rather than simply providing information. The FSA defines interactive dialogue as face-to-face, telephone, social media or online propositions that contain the facility for live chats.

However, after a borrower has received advice, they can reject it and agree a product on an execution-only basis. The ban will not affect high-net worth borrowers who can continue to be exempt from advice.

Around 30 per cent of mortgage sales are currently non-advised, according to the regulator.

Equity release, right-to-buy and sale and rent-back sales must also be sold on an advised basis. However, sale and rent-back transactions are not liable for the opt-out after receiving advice, as the FSA says these people tend to be in a vulnerable financial position.

The FSA says it will publish its feedback statement and final rules next summer but will not implement the rules before the summer of 2013.

In November 2010’s distribution and disclosure MMR consultation paper, the FSA backed away from moving to an all-advised market, proposing instead to strengthen the sales standards in non-advised sales by making sure advisers made certain efforts to check if a product was suitable for a borrower. However, the FSA has now returned to its original plans to ban non-advised sales.

Association of Mortgage Intermediaries director Rob Sinclair says: “I think the recognition that for such complex transactions that advice is the right way to go is a positive step forward.”


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There are 18 comments at the moment, we would love to hear your opinion too.

  1. 5 years late as usual.

  2. I really never anticipated seeing such a level of State control introduced under a Right Wing Government.
    Sorry, my mistake, this is obviously National Socialism, Tory style.
    We are no longer talking Regulation, we are now talking total control. I wonder if the consumer has any real say in this?

  3. To Glen Mckeown

    About time when we see 1 in 5 people in mortgage arrears!

  4. Prbably wont affect the banks though will it?

  5. It may be 5 years too late Hugh but it is better never. Can we please now have mortgage advice regulated to the same standard as Investment advise, for the life of me I cannot understand how it is in the interest of consumers for advice on a
    £ 10 per month savings plan to require more qualification than the biggest investment of most peoples lives.

    Scream all you like it can’t be justified.

  6. Glen McKeown @ 9:20am

    I agree with the general principal of freedom, and therefore agree that state control should be limited in all industries including financial services.

    With mortgages, especially with the credit & debt crisis of the 21st century, I think there is a compelling argument for strongly encouraging advice however or even making it mandatory with brokers or advice firms who want to profit from the business of arranging mortgage contracts.

    In terms of ensuring customers happy with repayments, type of loan, risk of repayment (with preference on capital & interest repayments for high LTV or first-time buyers), and ensuring if things go wrong the debt can still be serviced – insuring home, building, life, health/unemployment.

    I cannot think why a FTB for example would not wish to get advice on a new mortgage if they are not financial services professionals or experts themselves, and how 100% advised mortgages would not be useful to society?

  7. So, if I understand this correctly, the banks and building societies will no longer be able to provide mortgages directly to customers. All of their key facts illustrations state ‘no advise given’.

    A bank will not give ‘advice’ as they would often have to tell a customer to go elsewhere for a better product.

    Where does the FSA get its ideas from?

  8. ..s’cuse…

    Just how can you ‘agree’ a product on an execution only basis….????

    and what constitutes HNW…?

    Be good for the advisor market as the lenders will now pass the baton for responsibility back to the IFA’s..

  9. Its Monday morning, its cold and raining and now we have all this good news fired at us. Merry bloody Christmas!

  10. At last this might put a stop to the lenders putting customers on product transfers where it is obvious that a so called Adviser has not taken account of the customers future plans or circumstances or can be bothered to ask!!

    Get these so called Advisers qualified and monitored the same as all others giving advice on all these matters and stop this repetitive get out phrase “it’s not my fault you chose the product you have”

    No customers fully understood what Non Advised meant when they were being offered products so this is well over due for the consumer in my estimation.

  11. It seems to me that unless banks and building societies are now prepared to give advice, albeit they may have to insist on checking wage slips etc, then brokers will benefit from the new rules. We may actually see many Direct Only deals disappear altogether. Moreover, if brokers are to suffer more red tape and bureaucracy in order to complete a mortgage case then either the procuration fees will need to be increased or the client will begin paying additional fees.

    Perhaps I have got it all wrong but whilst I don’t agree with someone being forced to take advice it I do think it will play into the hands of mortgage brokers and IFAs.

  12. How many of the ‘1 in 5’ cases of mortgage arrears are self – cert? Affordibility is the criteria – either whilst working or during a change in circumstances (oops, sorry, Mortgage PPI is now altogether bad!)
    Historically, borrowers were assessed by lenders in a correct and proper manner. In recent years, this changed as mortgage advisors (and lenders) got greedy. People will often lie when it comes to getting their ‘dream home’. A one size fits all blanket cannot work in any environment – suitability requires some diligence, both on the advisor and the borrower.
    I have a part interest only mortgage, which will be paid off when I choose. My mortgage is 0.49 % above base for life, which we purchased AGAINST the advice of our then, mortgage advisor. If I was to be paying rent I would be paying substantially more than I am now – Money which would be paying off a limited amount of capital. Much better in investments of my choice.
    The FSA, in its mortgage review, was (is) staffed by people who, generally, are not qualified or experienced. Each case is different and cannot be catered for by one strict set of rules.
    I agree with the commentators who mentioned that mortgage advisors should be authorised. This cowardice on the part of the regulator was incredible.
    There are too many in the FSA’s recommendations which, I think, will not help buyers (especially FTB) or the economy.

  13. This should stop the lenders in effect “advising” client’s via an informaion only offering.

    Now they will have to do things properly or pass things on to mortgage brokers.

  14. Will all ‘non advised’ sales be banned?

    Investments and insurance are just as complicated.

  15. I find it amazing that anyone is commenting on a 585-page report that only came out this morning. I will read it, digest it and then draw conclusions. I suggest that others do the same!

  16. I can just see all bank advisers being forced down the CII or similar exam route. Odds on that there will the the usual RDR exam exemption for the young terriers, employed by the banks.

    On the other hand, who knows, the banks may be searching for 140 point plus QCF 4 staff to either contract or employ to look after their mortgage clients.

    Wait a minute, is that santa and his reindeer or another pig flying through the air.

    Merry Christmas every one.

  17. At last the FSA sees sense! They should never have allowed the Mortgage Code to be introduced to “supervise” the industry. I could never understand why the biggest investment most people will make should not require regulated advice.

  18. About time all products are advised, however we should all sing the same song , banks as well, do the FSA understand the difference

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