View more on these topics

FSA warns brokers to give better advice

The Financial Services Authority has warned that after two years of regulation there are still worrying cracks in the information brokers are giving to clients.

Speaking today at the Mortgage Business Expo, Clive Briault, managing director of retail markets at the FSA, says the pressure is starting to increase on the processes for giving mortgage advice, and this is already revealing some worrying cracks.

He says: “We looked at the quality of advice processes in investment advisory firms earlier this year, and now we are looking at the quality of advice processes in mortgage firms.

“We aim to announce the results of this work at the beginning of next year. Early analysis of the results is worrying – particularly on the processes relating to affordability, lending into retirement, interest-only mortgages, and training and competence.

“We are continuing to monitor the provision of good quality advice within the mortgage sector to set a baseline against which future improvements can be made and measured. This will remain a priority for us next year.”

He says it is also particularly concerned about what the quality of advice processes work says about the approach to affordability in mortgage firms.

Briault says: “It is too early in the project to confirm numbers, but it is becoming clear that affordability is not being adequately discussed and assessed in an unacceptable number of firms. Indeed, in a worrying number of cases, affordability is not being discussed with customers at all.

“Some advisers believe this is the sole responsibility of the lender. Let me be clear about this. Both the adviser and the lender have responsibilities to ensure the mortgage is affordable; neither party can delegate responsibility to the other party.”

He says the second stage of the Effectiveness Review will take place next year and will focus on parts of the mortgage market where it believes there is likely to be consumer detriment, including lifetime mortgages and the sub-prime market.

He says during 2005, 24% of all new mortgages were on an interest-only basis. In more than three-quarters of these cases, accounting for 19% of all mortgages, it was not clear from its thematic work whether a repayment vehicle was in place.

He says: ‘This seems a high proportion to us. So we are investigating, through interviews with 750 consumers who have recently taken out an interest-only mortgage, whether advised and non-advised customers understand the risks of an interest-only mortgage. We want to know whether they make informed decisions when choosing this method over a repayment mortgage.

“We will publish the results of these two projects – on the quality of advice processes in firms in the New Year, and on interest-only mortgages before the end of this year.”


Lancashire Mortgage Corporation launches new products

Lancashire Mortgage Corporation, specialists in commercial lending and development finance, has launched a new range of products.The products include commercial loans and mortgages with an interest free payment holiday for three months and fixed interest rates in addition to interest only for the full term (up to 30 years) and a 2% discount. The new […]

Salt launches buy-to-let range

Salt has launched a range of buy-to-let mortgages to the intermediary market.Following its self-certification and sub-prime ranges, Salt is offering a three-year fixed rate buy-to-let at 5.60% and a three-year Bank Base Rate buy-to-let tracker at 5.75%.Salt’s new buy-to-let range offers rates at up to 90% LTV with rental cover requirements of just 115%, based […]

Mortgages PLC launches training scheme

Mortgages PLC has introduced a training scheme to help develop business development managers of the future.As part of the new trainee area manager scheme Mortgages PLC has created three positions aimed at graduates and people looking for a first move into a field sales role. The scheme aims to equip participants with a thorough knowledge […]

Big bubbly offer from Trigold

Trigold is giving brokers the chance to win a Nebuchadnezzar of champagne. A Nebuchadnezzar holds the equivalent of 20 standard bottles. Every application via Trigold’s Electronic Trading Centre before December 15 will be entered into a prize draw.

India Election Update

What a difference six months makes. Speaking in September last year, we had warned of ‘excessive pessimism’ afflicting the market’s perception of India. Since then, responsible central bank policy from the Reserve Bank of India (RBI), alongside improving global growth, has meant that India’s macro environment is strengthening quickly. The current account deficit has shrunk, inflation is falling and the government has embarked on a heavy dose of much needed fiscal consolidation. As a result, the rupee has been one of the strongest global currencies this year while the market has touched all-time highs, rallying by more than 20 per cent (GBP) since September. This begs the question: are we now in a period of ‘irrational exuberance’? Not yet.


News and expert analysis straight to your inbox

Sign up