The regulatory requirements for recommending any mortgage changed on 26 April with the introduction of the Mortgage Market Review.
In essence, Brian Murphy, head of lending at Derby-based Mortgage Advice Bureau, says lenders will no longer be able to offer what has until now been termed ‘information only’ sales, as many lenders have done when discussing mortgage needs with a potential borrower.
From April 2014, Mr Murphy says almost every mortgage transaction will have to be conducted under an advised process. A small number of transactions can be conducted under what is termed “execution only”, but Mr Murphy says it will generally be restricted to high net worth individuals.
Mr Murphy says: “The regulator has determined (quite rightly in our view) that for someone making what for most is, the largest transaction they will undertake, the borrower should receive ‘advice’ as to the most appropriate product for their specific needs.
“The process of assessing a borrower’s ability to afford the mortgage both now and in the future subject to a ‘stress test’ is part of the new regulatory regime as is evidencing a borrower’s income in all cases.
“For those buying with smaller deposits and consequently higher LTV mortgages the degree of scrutiny is likely to be higher.”
There are no specific additional regulatory requirements for a high LTV mortgage as opposed to any other, according to Ian Wilson, head of Halifax Intermediaries.
