Brokers have raised concerns after incorrect content around interest-only mortgages was published on comparison website, Compare The Market.
Lawson Financial director, Michelle Lawson, said the publication of inaccurate information concerning interest-only mortgages by the site was “disgraceful at best”.
This week, Compare the Market published a post on its website with the headline: “Should I overpay if I have an interest-only mortgage?”.
The post continued: “You'll have to weigh up overpaying an interest-only mortgage very carefully as it has few advantages.
“With an interest-only mortgage any overpayments won't be paying off the capital like it would with a repayment mortgage - this has to be paid in one go at the end of the term.
“So you won't be reducing the amount owed, which means your overpayments will have little effect. Instead you might want to consider boosting whatever savings or investments you've chosen to meet your capital payment at the end.”
In response to the post, Lawson said: “For a huge and 'trusted' consumer platform such as this to have such inaccurate information is frightening and highlights further the need for advice rather than information.”
Identification
The mistake was first identified by Advantage Financial Solutions director, Steven Morris, who said: “This is just factually incorrect.”
He explained that with interest-only mortgages only the interest for borrowing the money is charred and that this interest is paid using the monthly direct debit.
“Therefore any additional payments can only come off of the mortgage balance owing. Where else could the money possibly go?” he added.
“If you overpay and, say, halve your mortgage balance, you are then being charged interest on a balance half the size, resulting in half the payment.”
Understanding the subject
Other industry members also shared their opinions with Model Financial Solutions director, Hannah Bashford saying: “I’ve had to re-read this several times to see if I can make any sense of it.
She added that “it would appear whoever wrote this has no idea how overpayments work.”
A similar sentiment was shared by EHF Mortgages managing director, Justin Moy, who said: “Articles about regulated products and services, such as mortgages, must be thoroughly checked.”
He also stated that, perhaps more importantly, such articles should be written by qualified industry experts who understand the subject.
“How did this get through any sort of due diligence or compliance checks?”, The Mortgage Stop operations director, Rohit Kohli asked.
Trust
What makes this misinformation so “startling and scary”, according to Blue Fish Mortgage Solutions owner, Ross McMillan, is that sites such as these are considered a “reliable source” for a huge swathe of the general public.
He added that the status of sites such as Compare the Market with the general public means it's “frankly a disgrace that they haven't had the responsibility to do a basic sense check of their content”.
Additionally, Lodestone Mortgages & Protection director, Craig Fish, questioned: “How is it even possible that such vastly incorrect information can be shared on one of the UK's largest consumer reference sites?”.
Fish called for the FCA to clamp down on this quickly because “many thousands of UK consumers, unfortunately, look to these places for information and advice, and to be fed such false information is a punishable offence.”
Meanwhile, PAB Wealth Management director, Luke Thompson, spoke on the impact this could have on customers, stating: “It’s wrong but a layman on the street will potentially take this as gospel.
“If someone with an interest-only mortgage took this 'advice' at face value, it could end up costing them thousands of pounds.”
This sentiment was shared by Switch Mortgage Finance director, Elliott Culley, who stated: “When you think how many people probably read this misinformation, it makes you worry.”
Culley explained that he was concerned how many members of the public have believed this in a time when they may have been looking for advice in the current financial climate.
Moy added: “Almost every mortgage lender allows for overpayments, and they will either take effect immediately or within the month, thus reducing the mortgage interest payments.
“Who has read that article and made a financial decision that is wrong?”
Response
In response, a spokesperson for Compare the Market said: “We are committed to providing clear and helpful information to households.”
They added that the content has since been removed from the website and Compare the Market are “thoroughly” reviewing all associated content.
“Price comparison websites give people a range of options to consider when they are making financial decisions,” they continued.
“We recognise that mortgages are complex financial products, and it’s important for people to take time to consider the choices available to them.”
Additionally, they stated that, as a consequence, Compare the Market always offers customers the option to take advice that is tailored to their individual circumstances.
This is partnered with “the UK’s largest fee-free mortgage adviser” London & Country Mortgages, to provide customers with advice from across the market.
Thanks to the Newspage community for sharing their thoughts with FTAdviser.
tom.dunstan@ft.com
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