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What will be the position regarding HBOS products and whole of market coverage after M-Day?

The answer to this question lies in the Financial Services Authority&#39s Mortgage Conduct of Business Rules 4.3 which deal with the scope of service provided by firms when advising and selling.

The scope of service offered by advisers is defined under three categories: the whole market; a limited number of mortgage lenders; or a single mortgage lender.

The distinction between limited number of lenders and whole of market seems to ignore the scope of the majority of advisers who offer a good range of lenders and products but not all. In fact, the FSA does take this into account as the rules go on to explain that firms who describe their scope as whole of market must have considered a sufficiently large number of regulated mortgage contracts generally available from the market as a whole.

Therefore a firm could exclude the HBOS group from its lender panel and still describe its scope as whole market as long as it covers a sufficient range of lenders and products across all product and credit categories. Similarly, other groups that contain more than one mortgage lender, for example Lloyds TSB, could be excluded so long as a sufficiently wide range of other lenders and products is offered.

But can brokers offering only HBOS products claim to be whole of market?

On balance, the answer has to be no, although a reasoned argument could be made, given the range of lenders within HBOS. Going back to the rulebook once more, it is clearly laid out in Rule 4.3.2 that “a firm must take reasonable steps to ensure that the extent of the scope of the service which it holds itself out as offering to the customer reflects the extent of that scope in practice.” In other words, you can&#39t claim to be offering whole market unless that is what you actually do.

HBOS is a serious player but by no means could you say that the HBOS group – Halifax, Bank of Scotland, Birmingham Midshires and The Mortgage Business (when it reopens) – gives whole market access. Although these lenders cover a wide range of products, whole of market in the context of regulation is about choice of lenders as much as choice of products.

If a firm uses the term &#39whole market access&#39 the client would expect it to access products from all lenders. Of course, in absolute terms this is impossible but clients seeking a whole of market choice would expect to be offered more than four lenders. An adviser offering access only to HBOS lenders may claim that the products cover a broad spectrum but it is unlikely that such a narrow range of lenders&#39 deals will be top of the pops all the time.

The Initial Disclosure Document is clear on the categories of market access that a mortgage adviser can offer:

• We offer mortgages from the whole market

• We only offer mortgages from a limited number of lenders

• We only select products from a single company.

It&#39s pretty clear that the HBOS range in isolation falls in the second category.

Regarding whether brokers not offering HBOS products can claim to be whole of market, once again the distinction has to made between the size of mortgage market share held by HBOS and the number of potential lenders, which is usually estimated at around 100.

If an adviser offered no HBOS products but could offer products from the majority of the other lenders, could they justify a claim that they were covering whole of market? In reality, I can&#39t see any reason why an adviser offering whole market access should choose to exclude HBOS or any other lender&#39s products from their offering.

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