Mortgage regulation from Europe could push the mortgage market closer to Retail Distribution Review-style rules whereby brokers would not be able to accept commission, the Association of Mortgage Intermediaries has warned.
The trade body gave its response to the Financial Services Authority’s Mortgage Market Review paper on distribution last week.
But AMI director Robert Sinclair says he is not worried about the UK regulator banning commission as the threat is from Europe.
He says the way in which European regulation could be interpreted means it is unclear if it intends to adopt elements of the RDR, which will be introduced for investment advisers by the end of 2012, into the mortgage market.
So if an RDR system came in, he would want parity between brokers and lenders, whereby the latter must make clear how much their in-house adviser has added to the overall cost of the product.
Sinclair says: “At the moment it doesn’t appear lenders will be subject to the same degree of scrutiny as brokers.
“If brokers have to spell out the cost of advice and say how much the product and the advice costs, I would like to see the same from lenders.”
He says he can also foresee Europe forcing all brokers down the advised route, so they would not be able to carry out non-advised sales, but may not necessarily include lenders.
He says: “This is what lenders are pushing for. I’m concerned we are going to get the kind of mortgage rules that existed in the UK 15 years ago, as opposed to the more developed risk issue we now have.”
In its response to the MMR, AMI argues there is a strong case for making advice compulsory for some if not all ’at risk’ groups such as the credit impaired, first-time buyers and those borrowing into retirement.
The trade body says the proposals on appropriateness and affordability might make it difficult for consumers to identify the difference between the two processes.
Other bodies such as the Council of Mortgage Lenders strongly support maintaining a non-advised route. AMI says it could support this but only if customers are made aware of the protections they may be foregoing in following this route, such as their right to complain to the Financial Ombudsman Service.
In its response to the MMR paper, the CML says there is a risk that the single standard proposed by the FSA to cover advised and non-advised mortgage sales will create as much confusion as it seeks to resolve.