Keith Barber, associate director of business development at Family Building Society, says advisers must ensure their client’s chosen strategy is on track to repay the loan.
Customers must be careful not to assume they will be able to ‘remortgage’ at a later date to repay the interest-only loan, says Mr Barber.
He says while his building society is still willing to lend to older applicants in the right circumstances the number of lenders prepared to do this has significantly reduced over the last few years.
Mr Barber says: “This also provides the opportunity for advisers to revisit their clients periodically, review progress and the customers’ wider financial situation. So, advising on a mortgage is not just a one-off project.”
Martin Richardson, general manager of business development at Leeds Building Society, says the repayment strategy must be reviewed at least once during the mortgage term.
This review is to ensure the repayment strategy is still in place and a credible source of repayment for the loan and any interest accrued, he says.
But as most mortgage advisers are not authorised to give investment advice they would not be able to advise on whether any investments the client was planning to use were suitable, Ray Boulger, senior technical manager of John Charcol, says.
Mr Boulger says mortgage advisers must make the limits to their knowledge and remit clear to the client when conducting the review.
He says: “Many mortgage advisers will have a relationship with an IFA they could offer to refer the client to if the client does not already have one.
“The rules require the lender to check at least once during the mortgage term that the customer still has a repayment strategy in place but there is no requirement on the mortgage broker to do so.
“However, in practice, whenever the client’s mortgage arrangements are reviewed it will be necessary to reassess, and advise accordingly, whether interest-only is still appropriate.
“It is important to note that the FCA states that ‘Ultimately it remains the responsibility of the customer to maintain their repayment strategy.’”
