Mortgage brokers say a decision taken by the Mortgage Code Arbitration Scheme could force up professional indemnity premiums.
MCAS last week revealed it has levied a £12,000 fine against a broker who recommended an un-suitable mortgage based on sourcing system quotes.
Though the broker gave advice based on the fact that he was unable to find a lender willing to extend the loan beyond his client's 65th birthday, the client later discovered a cheaper rate offered up to the age of 70.
Brokers have responded to the case's implications with great concern.
Peter Stokes, director of Poole-based Davidson Deem, says: “This broker was fined not because of the illustration he produced but for not verifying the products he did produce an illustration for. This implies that we have to verify all the thousands of products available. Bearing in mind that each product has at least 10 factors to take into account, this is simply not possible.”
Stokes has spoken to the MCCB and says it broadly agreed that this was the scenario. The MCCB was unavailable for comment last week.
Stokes adds: “This is not something that brokers realise is a problem but it could become monumental, particularly with regard to professional indemnity insurance rates. Sourcing systems are having their cake and eating it and the arbitrator is being unrealistic.”
Neal Smith, compliance manager at the Whitechurch Network, says: “Brokers must know the lending policy and underwriting criteria of all lenders used and have product-specific knowledge. Every time a mortgage is placed they should contact the lender to check the features of the deal with those on the illustration and also check on the product's availability.”