Intermediaries and lenders believe finalised plans for Cat-marked
mortgages have muddied the already murky waters surrounding the role that
IFAs will play in the benchmarked market.
Legal & General marketing manager housing market Richard Verdin says: “I
genuinely do not think that IFAs have differential earnings on their mind
when they are advising on a particular product over another but if
Cat-marked mortgages are not sold in large numbers, a trap will be set for
IFAs to get caught in.”
Savills Private Finance managing director Mark Chilton says: “How will
brokers provide best advice when they will not get paid for advice on one
product? The less reputable broker will skew advice away from Cats.”
Many lenders question whether the Government's decision to encourage the
“execution-only” route for mortgages will help the FSA achieve its goal of
a financially empowered and aware public.
Some believe that it could lower the knowledge base of clients and confuse
the public into believing that Cats are Government-approved and the best
product regardless of other options.
Scottish Amicable national mortgage manager John Malone says: “It will be
a big issue for IFAs to get over to clients that the Treasury's kitemark
does not necessarily mean it is the right product for every client.”
Verdin says: “We seemed to be heading down the fee route but the latest
news seems to be pushing against the wind. But with a bit of luck IFAs will
be able to prove their value.”
As the amount of time and admin it takes to advise a client on a mortgage
plus the admin has grown, IFAs are wondering if a procuration fee alone
will be a fair reward for their advice.
Mortgage Code Compliance Board chief executive Luke March says: “It is a
great disappointment. If lenders want Cats to succeed, they need to
increase the procurement fee. If brokers are trained well, they should be
To make matters worse, while payments to advisers are restricted, their
workload may increase, with every intermediary having to rewrite their
terms of business.
Malone says: “Section 165 of Consumer Credit Act says the maximum a client
can be charged is £5 if the case does not proceed within six months. IFAs
will need a sentence in their terms of business which is a caveat on
A new set of uncertainties have been added to what is perhaps the most
uncertain sector of financial services.