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Real world of mortgage fees

It was a former Conservative Chancellor who suggested he could see the green shoots of recovery while the UK was still in recession in the early 1990s. He was vilified although, in hindsight, he was probably correct.

Even a casual glance at the business pages suggests that the tips of the shoots are starting to appear for the securitisation market, which eventually means that the restrictions on the supply of mortgages will ease.

As with Norman Lamont’s remarks, the big question is how long before this has an impact in the real world. It would be great to see a semblance of normality return soon but that is probably overly optimistic. There may be many more months of pain.

In that real world, RICS has come up with a prediction that housing market transactions will fall by 40 per cent this year and house prices will go down by 5 per cent. It also says with more optimism that the worst payment shocks have already been felt as borrowers have come off the bulk of two-year fixed rates.

Also in that real world, comments from the FSA that brokers might look to charge a fee and provide their own KFI for mortgage products not normally distributed through intermediaries have a certain appeal. There are many obstacles. The first is that mortgage advisers would have to convince clients to pay a fee. The second and what may well be a bigger hurdle is that it is not always so easy to get access to lenders’ KFIs on such products.

Some lenders have KFIs that they say are freely available while others are not. Without that information, it may be difficult for a broker to move from simply tipping a product from a lender to advising on it. In addition, without the lender distributor relationship all manner of terms and conditions may change in a matter of days. The degree of control that comes from cooperation is sadly lacking.

So Money Marketing, while broadly supporting the suggestions from the FSA, must add that it may be easier said than done.

In the meantime, we hope that those clever men and women in the world of investment banking who helped get us into this mess, get their thinking caps on and find ways to free up the market and end the mortgage drought.

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