The regulatory risk of providing advice is the main driver behind lenders fighting a proposed ban on non-advised mortgage sales, Precise Mortgages claims.
The Financial Services Authority proposes the ban in the Mortgage Market Review. It aims to end customer confusion over when they are actually receiving advice.
Alan Cleary, managing director of Precise Mortgages, says that execution-only sales carry no risk of mis-selling to lenders.
He says: “Now there could be advised sales there is a risk that lenders could end up paying redress, which is a big cost and is what is concerning banks.
“The potential regulatory risks can’t even be calculated. Just look at the payment protection insurance mis-selling scandal and endowments.”
Cleary says one of the attractions of using brokers is that lenders can outsource their regulatory risk for selling mortgages.
He says: “It is one of the beauties of using intermediaries because they are the ones authorised to give advice. They train under their own regime and if lenders tap into it they don’t have those costs or issues.”
In its submission to the MMR, the Council of Mortgage Lenders warned that changes to who takes responsibility for mortgage advice could create increased risks for lenders.
The CML suggested that the increased risk could lead lenders to pull out of certain areas it deemed too risky to deal with, affecting a range of customers.
Industry consultant Mehrdad Yousefi says regulatory risk is a concern for lenders but there are other factors to consider too.
He says: “The other issue is the time it takes from application to completion for applicants who know what they are doing and don’t want advice.
“The time and cost associated with these transactions will be higher and overall it costs the industry more money every year.”
Yousefi argues that experienced consumers should not receive advice as they know what they are doing and don’t want to go through the time-consuming process.