The FSA has stood firm on its proposal to ban non-advised mortgage sales but has carved out administrative changes to existing mortgage contracts from the new rules.
In its last mortgage market review consultation paper, which was published in December, the FSA proposed that non-advised sales should be banned where there was any form of “interactive dialogue” between a customer and a lender.
Lenders raised concerns about administrative staff being captured by the proposals in the December paper and have lobbied for an exemption to be made for these people.
They also argued the rule would contradict the FSA’s approved persons rules, which state back office staff and those involved in post-completion activities would not have to be individually registered.
In a policy document published today, which outlines the FSA’s final rules for the regulation of the mortgage market, the regulator confirmed that sales would only have to be advised if the lender has “steered” a customer towards a product – or set of products – or where the customer wants a further advance.
As long as the consumer does not want to borrow more, contract variations like changing the payment method, rate switches and retention deals or porting the mortgage can be done on an execution-only basis. Forebearance would also be exempt from the non-advised ban.
The FSA has also slashed the income limit of a high-net worth mortgage customer from £1m to £300,000 and formerly recognised that borrowers in this bracket will be able to opt-out of receiving advice
The paper says: “Our view is that where it is a simple product switch and nothing more, it would be acceptable for the lender to act on the borrwer’s instructions over the telephone, or in the branch, and proceed on an execution-only basis.”
FSA director of conduct policy Sheila Nicoll says: “It is common sense in that clearly if something is a straightforward matter, then you don’t necessarily have to go through the whole advice process.”
The Association of Mortgage Intermediaries has slammed the FSA for excluding contract variations from the non-advised sales ban.
Ami chief executive Sinclair says: “I genuinely think this will be bad for consumers and the FSA has not gone far enough. I remain to be convinced this is enough to protect consumers. I think allowing a consumer to just tick a box without fully understanding the consequences is a weakness in the proposals.
“Lenders will not have to do an awful lot when a borrower comes to the end of a loan, they just have to make them aware of the products available and then the customer picks. I think that is a bit weak.”