View more on these topics

The grey regulation on execution-only mortgage advice

Robert-Sinclair-2012-700x450.jpg

The challenges facing the larger mortgage lenders at the moment could not be more intense.

The agenda is complex: house prices are coming off their peak in London, Help to Buy is beginning to be withdrawn, more new entrants and competitors are taking market share, the base rate is at record lows and they are having to manage ring-fencing and horizon changes to capital and liquidity requirements.

With residential mortgages being seen as a cornerstone to income and profitability, acquiring more and retaining what you have already got has become core to success.

With branch networks now a huge cost and resource liability, combined with issues on legacy systems and cyber crime, there are few quick fixes. Most scale players also still have payment protection insurance and Plevin liability to work through, problems in the handing of arrears and other past business reviews that are slowing innovation.

The Mortgage Market Review ended up being all about advice and the last three years saw many big lenders not investing in getting their branch and telephone operations fully qualified to deliver advice through people.

What we have seen is a huge move to offer execution-only, particularly as a retention tool, initially via letter but now through scale investment in web portals to allow borrowers to pick a new rate at the end of their reduced rate period. This means it is likely about £100bn of mortgages are rearranged each year on an execution only basis.

What has become a subject for debate is what liability the introducing broker still has following a product transfer. Has the property been revalued to deliver the right rate for the customer? Have they been encouraged by waiving of early repayment charges or special exclusive interest rates to avoid taking advice? After the product transfer, does the customer still have full Financial Ombudsman Service rights?

Where lenders are deploying IT solutions that ask a series of questions with supporting help screens does this truly meet the definition of execution-only?  In the intermediary world, disclaimers are not accepted by the regulator to avoid our advisory responsibilities. It must be hoped that purely by labelling a web portal as not providing advice that it is not carved out. As the existing lender offering a new rate they must be on the hook as advising.

Robert Sinclair is chief executive at the Association of Mortgage Intermediaries

Recommended

2

Chancellor considers scrapping Autumn Statement

Chancellor Philip Hammond is considering dropping the annual Autumn Statement to focus on the Budget and move away from “gimmicks”. The Financial Times reports while Hammond will be delivering the Autumn Statement as planned on 23 November, the Chancellor is said to have told colleagues he wants to move away from gimmicks and micromanagement and […]

UK-Currency-Money-Coins-700x450.jpg
25

FCA reveals how advisers are charging their clients

Advisers are charging an average of between £150 and £195 an hour, according to the FCA. The regulator released a data bulletin today that focuses on retail intermediation firms including financial advisers, mortgage brokers and insurance brokers. It is the first time it has published data submitted through retail mediation activities returns, part of its Gabriel […]

Bravura lines up $148m IPO

Platform technology provider Bravura has kicked off an AUD$148m (£92m) initial public offering of shares in the company. 48 per cent of the company is being put up for sale to new shareholders. Existing shareholders, including management and Australian private equity firm Ironbridge Capital, will hold 52 per cent post-listing. Bravura employees will be able […]

UK policy: Kate Moss and short-termism

“Nothing tastes as good as skinny feels,” said supermodel Kate Moss, who is not often credited for her insights into policy making. Perhaps she should be. In politics, as in matters of diet, the course of action that is the best over the long term is often not the most desirable course of action in the short term. Add the instant gratification of the democratic electoral cycle and, instead of good policy making, you sometimes get the equivalent to a midnight binge in front of the fridge.

Read more


Important information

Investment risks

The value of an investment and any income from it can fall as well as rise and you may not get back the amount originally invested. Forecasts and past performance are not a guide to future performance. Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness. These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you of any change to our views.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment