How execution-only works
According to the Association of Mortgage Intermediaries (AMI) execution-only sales, including variations to existing contracts, are restricted to cases where there is no spoken or other interactive dialogue between the firm and the customer in the course of the sale. During this time the customer has to have rejected advice, identified the product which they wish to purchase and elected to proceed with the execution-only sale.
If the customer is a high net worth individual, a professional customer, or the loan is solely for a business purpose, then some interaction between the firm and the customer may occur during the sale. In any of these cases, the customer must have chosen to go ahead with an execution-only sale and have already identified the product that they wish to purchase.
David Hollingworth, associate director at London & Country Mortgages, says, “The natural environment for execution-only looks to be set online, where borrowers could, in theory, transact their mortgage from product selection through to making an application and beyond.”
The changes in MMR have made mortgage applications more complicated than ever, furthering the need for many borrowers to seek the opinion of an adviser.
“However, our experience of online transactions has always been that clients do, at some point, want to clarify something about their product choice. As a result, we’ve decided not to offer execution-only and concentrate on our core advice offering, which after all is what the vast majority of our clients want,” Mr Hollingworth continued.
The AMI states that an execution-only sale can be conducted through the internet as long as there is no interactive dialogue. However, as soon as this process begins to steer the customer away from one product and towards another, then advice requirements apply. Text messaging, instant messaging, email and communication on social media sites are all considered to be interactive dialogue.
Andy Knee, chief executive of Legal Marketing Services, a UK provider of outsourced property services, says, “For a number of years, many have anticipated a rise in the number of mortgages being completed online. This has failed to materialise to the amount expected since even those with a great deal of understanding still want the reassurance and advice available to them for the final stages of the process.”
While practical in theory, the option of purchasing a mortgage online for the sake of convenience may be more difficult than a customer imagines. Lender websites may not be straightforward enough for the average borrower to fully understand, which may require them to eventually seek help from an adviser to ensure they are purchasing the mortgage product in the correct manner.