There were a few feathers ruffled this week when an IFA wrote into Mortgagedistributor.co.uk having a pop at the sub-prime market.
Harry Katz from Norwest Consultants felt that brokers and packagers shouldn’t be able to make money from those who find themselves in financial difficulty and felt this could even be immoral.
He seemed to think that those who may find it hard to get a mortgage shouldn’t have one at all.
This claim resulted in my inbox quickly filling up with emails from disgruntled readers who felt that his comments were both unfair and unfounded.
It is easy on the one hand to see where Katz is coming from with his remarks, after all, the reason the economy is in a bad state is because our US friends have been giving mortgages to those that couldn’t afford them.
However, if you opt for a job in financial services, then it is not a great idea to prejudice against those that have found themselves in financial difficulty. It’s not a perfect world, and not everyone has a perfect record, and it’s not a brokers job to sit in judgement on people’s finances. At the end of the day, if lenders are prepared to offer the products then why shouldn’t the broker and the customer take them.
Brokers and packagers are not being greedy accepting the extra fee from lenders for a sub-prime case, but they are being paid for doing the extra work. It is a privilege for someone with an extremely bad credit record to get a mortgage, and if a broker/packager can find a product for them, then why shouldn’t they get paid the extra fee.
In a reverse situation, if borrowers who had a clean credit record were charged more and brokers got a bigger fee, then this surely would be more immoral, as you are rewarding those who have got into financial difficulty by not charging them for it.
A lot of people who start off on sub-prime mortgages will move to a prime rate over time, showing that they are capable of paying back their mortgage and they have reformed their finances.
It is all too easy to sit in judgement on others finances, but the very person that shouldn’t be doing this is a financial adviser.