The European Commission is deciding whether to make it compulsory for customers to receive advice before they can sign up to a mortgage deal.
The EC wants to ensure responsible mortgage lending throughout Europe and will publish its proposals in the next few months.
Robert Sinclair, a director at the Association of Mortgage Intermediaries confirmed that discussions were ongoing with debates ranging from whether all mortgage customers, or just specific groups of mortgage hunters, should receive advice.
Sinclair says that first-time buyers, people with mortgage arrears and those looking for an interest-only contractor mortgage are most likely to fall into the needing advice bracket.
Sheila Nicoll, the director of conduct policy at the FSA, said in a speech last year that about 30% of UK mortgages are non-advised. At that time, she raised concerns that customers do not understand the difference between an advised and a non-advised sale.
At the beginning of this month, the FSA published a product intervention paper which suggested banning non-advised sales for complex mortgage products or instances where the risk of consumer detriment was high.
Jonathan Cornell, from First Action Finance, thinks it would be a great move to make it compulsory for buyers to receive advice. Mortgages are complex products, he said, and the consequences of getting it wrong are huge.
The Council of Mortgage Lenders, on the other hand, says that in principle they would prefer a more permissive regime as opposed to a restrictive one.
But irresponsible lending was what got us into the financial crisis in the first place, so surely advising clients is a necessary step towards ensuring the same thing doesn’t happen again?
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