Each week Mortgage Solutions and its sister title Specialist Lending Solutions select the most thoughtful or thought-provoking comments from our readers.
This week has been rich for top contributions.
The first one is from Paul Fielding for his response to the article: MMS: FCA says broker incentives stop borrowers getting a cheaper deal.
He said that the opening remarks in this from the FCA are wide of the mark, particularly when it comes to product transfer business, which are often time sensitive.
“A client will call a broker to ask their advice on whether to accept the products offered and to get one in place quickly if deemed to be best advice. Brokers are always having to look over their shoulder however, with some lenders, whereby if the broker does not act smartly on the client’s behalf, the lender will readily steal the business on a direct basis.
“Indeed, why did I recently have to help a client who received a product transfer letter dated so close to the end of the current deal that was about to expire, there was virtually no time left to sort it, hence lender tactics forcing the issues, playing upon a customer’s panic mode.
“Notwithstanding the need for a broker to show all necessary diligence, there also has to be a balance, and some of the remarks in this report show just how little the rule-makers understand about the real world out here.
“How many FCA people have actually ever done the job themselves? If they have and done it well and become successful as a result, why are not they still here doing it? It makes my blood boil when the regulator says we only act in order to secure a procuration fee.”
Would have benefited from advice
Another contribution comes from Mart Crox for his response to the article: MMS: FCA rule changes to support execution-only as consumers ‘channelled unnecessarily into advice’.
He said: “Here are three recent cases where the clients were ‘channelled unnecessarily into advice’ or certainly would have benefited from it. All were £0 advice fee.
1) A remortgage deal with a saving of £1,100/year on a five-year fix. The clients ignored my advice and went direct to their own bank “because it was easier than collecting documents”. The clients had come to me with bad credit years previously, which I had helped repair.
2) An elderly client I advised on a product switch deal on a £95,000 loan with £0 fee. The client ignored my advice and having seen research sorted by total to pay over product term, saw the same lender had a lower rate. The client chose that product with a £1,995 fee and went direct to the lender, but his overriding goal was to repay the mortgage as soon as possible.
3) A new enquiry client wanted to raise money for a home extension and debt consolidation from previous home improvements. Their own lender had declined on affordability as their policy was to not ignore consolidated debt. The client had just started a self selected 10-year fixed rate admitting they knew they wanted to raise more in a few months. A move to another lender would have easily been possible but the crippling early repayment charge dismissed that option. The client decided to look at personal loans or second charges but felt they could manage that themselves.”
Highlight limited company risks
Our last contribution comes from Arron Bardoe for his response to the article: Brokers respond to challenge of ‘split portfolio’ landlords – analysis.
Bardoe said that tax advice from an accountant would be too narrow for an individual to make a decision and a borrower’s decision must be taken in parallel with mortgage advice and financial advice.
He said: “This assumes of course one can find an accountant with the expertise to be able to provide the advice, as many accountants are not also tax advisers.
“The rates and fees for limited company buy-to-let can be twice as high and so wipe out any tax savings, so a product comparison from a broker is essential.
“Thereon, financial advice would seek to understand the plans on death and/or retirement, as again there may be greater or fewer benefits.
“As mortgage brokers, we should be highlighting these risks to our customers and strongly recommending they get advice from all three parties before pursuing a limited company buy-to-let route.”