The FSA’s final Mortgage Market Review consultation paper specifies that brokers and lenders will no longer be able to offer customers mortgage products on a non-advised basis.
Under the proposals mortgages must be offered on either an advised basis or execution-only.
Consumers can request an execution-only sale if they know precisely what they want to buy or if they are a mortgage professional or high net-worth client.
However, lenders are believed to be trying to introduce a new tier into the advice process known as transacting, which they argue is not offering advice.
Transacting occurs when a customer who has already taken out a mortgage wishes to make amendments to their deal, such as changing from interest-only to a repayment method, extending or shortening the term of their mortgage or remortgaging with the same lender.
Robert Sinclair, director of the Association of Mortgage Intermediaries, says it seems illogical that so-called transactors would not be classed as advice givers.
He says: “Such tasks are rarely execution-only as the customer arrives with a problem and the lender representative provides a solution usually through verbal interaction.
“That this verbal interaction must be advice is a logical conclusion based on the new rules.”
He says the issue needs to be debated before the cut-off point for submissions to the MMR on March 30.
Sinclair is concerned that a debate is happening behind closed doors but says the issue needs to be discussed openly.
The MMR states: “We believe that in all sales where there is spoken or other interactive dialogue between the consumer and firm, the firm should assess whether the mortgage is appropriate for the consumer i.e. advise the consumer.
“This will cover all forms of interactive dialogue, whether face-to-face, over the telephone or social media, or online propositions with the facility for live chats.”
A spokesman for the Council of Mortgage Lenders says: “There is clearly a distinction between a customer who is changing an aspect of their mortgage and one who is applying for a new loan.
“There is a case to be made that the person would not need to go through the advice process and we will be exploring this in our response to the MMR.”
See today’s magazine for more details.