The Association of Mortgage Intermediaries have raised the emerging issue of networks removing advisers’ permissions for product areas they fail to advise on.
Its latest quarterly economic bulletin admitted it was too early to identify a full-blown trend, but cited anecdotal evidence that in most cases this relates to the non-selling of protection policies by mortgage advisers.
“While protection is not a mandatory sale, when a customer takes a mortgage it is prudent for advisers either to recommend protection to a customer or to refer the customer to an alternative source of protection provision or advice,” the update read.
“We believe that increasingly networks are opting to create specialist panels to enable efficient referrals of protection and other specialist advice such as equity release to advisers who have strong expertise in those areas.”
Ami stated this would be a positive outcome for both intermediaries and customers, as it has the potential to allow the former to focus on mortgage advice excellence and the latter to go through the mortgage process, without missing out on advice about how to protect their financial wellbeing.
John Cupis, mortgage director at Openwork, responded that for the vast majority of customers protecting their home, in the unfortunate event of illness or death, protection is an essential requirement.
He said: “The appropriate advice provided by specialist protection advisers who follow on from the mortgage sale is a feature of some business models, but the predominant position of most advisers in the UK is a one-stop shop provision of protection at the same time as the mortgage; saving time with the customer sharing relevant personal details to facilitate an easy sale process.
“Technology in the future will enable different ways for customers to interact with advisers for different products at different times, but being able to deliver the essential needs in one sale is still relevant today for most customers.”
Elsewhere in the bulletin, Ami accused lenders of continuing to fail ‘mortgage prisoners’ by refusing to acknowledge those who have no options when wishing to remortgage, while also blaming the regulator for causing the problem with the Mortgage Market Review.
The association’s research suggested up to one million mortgage prisoners are being neglected by the Financial Conduct Authority, because they do not fall within the remit of the regulator’s responsible lending review.
Ami stated its members are seeing many borrowers struggling to remortgage, despite transitional arrangements still in place even following the Mortgage Credit Directive implementation.
Borrowers in the area of interest-only, lending into retirement, self-employed, contract workers, foreign currency earners and ex-pats still need attention if the market is to serve the whole, the update argued.
Lee Travis, head of professional development at the Society of Mortgage Professionals pointed out in an FTAdviser guide that the MCD may well disadvantage these so-called mortgage prisoners, as lenders will now apply affordability checks on all remortgage customers coming from rivals, in order to comply with the directive.
The FCA noted a conflict between the MCD and its transitional arrangements during consultation, so allowed lenders to waive parts of the MMR for borrowers who may be trapped under the new rules.
“During consultation we identified a conflict between the MCD and some of our current affordability rules for existing borrowers making changes to their mortgages,” read the regulator’s paper. “As a consequence, we withdrew certain enabling provisions as they are not MCD compliant.”
Research from Nottingham Building Society at the end of last year found one in seven homeowners who tried to remortgage in the past two years failed to secure a new deal either with their existing lender or a new lender.
The main reasons for rejection were tighter affordability rules under the MMR and issues with credit records, however 11 per cent said they were turned down for being too old.
peter.walker@ft.com
