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Just another click in the wall

Mortgage intermediaries are facing very interesting times.

New products, the increasing role of the media, the change in consumers&#39

attitudes, new regulations and, more significantly, the growth in the

number of online lenders and brokers are bringing new challenges to

intermediaries who will need to react and adapt to these changes.

I feel at the moment as though every couple of weeks I have yet another

request for details of our mortgage products and lending terms from the

latest mortgage database provider via the internet.

The wealth of new sites makes it easy for the customer not only to find

the cheapest rate but also to match lending terms to their own situation.

In theory, the borrower who requires four times income and has a couple of

county court judgments should not find a product he wants and a lender

which will accept him.

Not only that but from some lenders he should have a decision in principle

in a matter of seconds and be able to track the progress of his mortgage

application online.

Where does this leave the mortgage adviser? Is there a future for

face-to-face advice, whether it is on one company&#39s products or the whole


In the last few years, the media have played an important part in giving

financial advice to the customer. Whenever financial research is

undertaken, the Sunday papers are frequently quoted as a source of advice.

Add to that the friend down the pub whose advice is also based on the

financial pages of a national newspaper and its role cannot be ignored.

In fact, it has worked in favour of many lenders that have gained a lot of

business by appearances in best-buy tables and sometimes have deliberately

priced to do so.

This interest in financial matters has led to a growth in the specialist

consumer press. Potential borrowers can read up on current issues before

looking for a mortgage themselves. The good news is the amount of interest

this has generated in the mortgage market.

It was not so long ago that a fixed rate was consid-ered innovative. Now a

grow-ing number of lenders offer flexible loans and, in some cases,

borrowers can have their salaries paid into the loan and operate it as a

current account.

Flexible schemes suit today&#39s changing lifestyle but have also created an

awareness of how interest is calculated.It is no longer acceptable fora

lender to wait until the year-end before taking account of any overpayment.

Other changes are mortgage indemnity premiums, which can be a significant

additional cost to the borrower. A few lenders no longer charge this, with

most charging only for higher loan to value loans.

Borrowers are also more aware of redemption penalties, particularly those

who have been stung and had to pay a big early redemption charge. Some

lenders have abolished extended tie-ins completely.

However, if you have no intention of moving house or your mortgage, an

extended tie-in can offer the best rate. The key is making sure the

borrower fully understands the agreement they are entering into and this is

where a good adviser has the advantage.

The market has attempted to ensure that the customer has full

understanding through the Mortgage Code Compliance Board&#39s standards.

Lenders and intermediaries must ensure advisers are competent to give

mortgage advice. Part of the process includes the need to go through a

checklist with the applicant, ensuring each detail has been explained.

From next year, mortgage advisers will also have to pass the Cemap

qualification (Certificate of Mortgage Advice and Practice).

However, self-regulation is not considered to be adequate and mortgages

are to be regulated by the FSA but not the advice process itself. This has

been the subject of much debate within the industry.

Creating awareness of the many variations of a mortgage can also create

confusion. Despite transparency over payments to advisers, is it lack of

trust that makes some consumers want to find out as much as possible for

themselves? For the customer who is not confident enough in his or her own

judgement, the adviser may be just confirming the initial view.

The Government has responded to the uncertainty with the introduction of

Cat standards for mortgages. First introduced when Isas were launched last

year, the standards are designed to help consumers compare products more


However, there are only a few mortgages on the market which currently meet

the Cat standards. As the standards themselves are not an endorsement of

the product, this seems to be yet another area that a potential applicant

needs to consider.

What does all this mean for the adviser? Well, the immense amount of

interest in mortgages has made the industry aware that they may seem

straightforward to us but many customers are confused.

Today, customers may use the internet to gather information but many of

them still require personal advice – whether it is over the phone or face

to face.

The time may come when most mortgages will be distributed via the

internet. In the meantime, mortgage brokers will have plenty of opportunity

to major on the quality of the advice they provide to their customers.


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