Financial advisors will be obliged to explain and record why they didn’t get you the cheapest mortgage in the event of that happening, under plans released by the financial watchdog.
The Financial Conduct Authority made the proposal after finding in March that 30% of consumers could have got an identical or better mortgage that was cheaper than the one they got.
At the time much of the mortgage industry accused the regulator of focusing too heavily on price, saying there are other factors to take into consideration, like whether a lender will actually give you a good service rather than just the cheapest one.
However, the proposal has received a largely positive response from advisors so far.
Many say they explain and log when they don’t give you the cheapest deal already – and expressed surprise that this wasn’t an official rule anyway.
The Financial Conduct Authority listed examples where an advisor might offer a more expensive mortgage over the term – one would be if they recommended for you to take out a mortgage with no upfront fees, if you’d struggle to pay out a hefty lump sum at the start of your deal.
Any advisor worth their salt will keep you in the loop even before this potential change comes in, but it still seems a positive development to have it be a regulatory requirement.
The Financial Conduct Authority said lenders are wary of developing new tools with fresh technology in case it counts as giving you advice, which would mean they are responsible for steering you towards one or more mortgages.
Meanwhile, it plans to reduce the number of rules mortgage lenders have to comply with if you want to take out a mortgage without getting advice.
These other plans have attracted more of a mixed response. From some quarters the watchdog has been praised for embracing new technology, by changing the rules to help organisations develop tools to inform you and me.
But others think it’s dangerous to loosen rules around helping you apply for a mortgage yourself, owing to the danger of getting wrong what is likely to be the largest piece of debt you will ever have.
The debate on these plans will likely rumble on and on.
Work in progress
The measures are subject to a consultation with mortgage firms, trade bodies and consumer bodies, and we’ll likely find out what plans are given the go-ahead around the end of the year.
The move to make advisors explain and log their decisions seems likely to happen, given the initial response, though the other elements that arguably encourage you to take out a mortgage without advice will invite a heated discussion.
On one hand, the development of new tools would help educate people to take out mortgages themselves, while on the other, the market has been viewed as a safer place since it became the norm to get advice when getting a mortgage.
One way or another, changes are afoot. Watch this space.
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