It also suggested that the Council of Mortgage Lenders (CML) had underestimated gross mortgage lending this year by £100bn, that Stamp Duty should be made regional, and that banning proc fees would hurt consumers.
AMI raised concerns that there was evidence online firms were using different sets of compliance standards and using small print to avoid full regulatory responsibility.
The trade body’s quarterly economic bulletin said: “Embellished price comparison sites that still require discussions with a broker or effectively sit on the boundaries of non-advised are not the robo-advice panaceas that the PR messages are selling.
It added: “AMI has asked the question: If established mortgage advisers are required to compensate customers who have a legitimate complaint about the advice they were given without limit on that compensation, should not online advisers also be held to the same account?
“AMI is concerned that the regulatory sandbox environment, in its desire to support innovation, may be unconsciously condoning less onerous compliance standards than those required from established firms.
“If an unfair bias is being constructed for newer firms, whose advice and complaints history is yet to be seen, AMI would like to see this appropriately addressed by the regulator,” it added.
Underestimating borrowing
AMI also highlighted that it believed the CML had underestimated this year’s gross mortgage lending by more than one third. “This figure masks a huge volume of product transfer lending, which could raise that gross figure by at least a further third,” it said.
“This is where a borrower is about to reach the end of an initial rate as part of a longer-term contract and the lender offers another fixed or tracker rate that is less than the default rate of the original contract.
“Were this renewal lending to be included in the overall gross figure, AMI is of the view that roughly £350bn is a more realistic measure of gross lending likely in 2017,” it added.
It noted that there was unlikely to be any impact of Brexit on the mortgage market until the middle of next year or even 2019.
As a result, it argued that the CML’s estimate for gross mortgage lending of £248bn looked “conservative”.
Review Stamp Duty
AMI noted that lending was now largely driven by remortgage and product transfer, reflected in increasingly weak estate agency transaction numbers.
In response to the Housing White Paper’s query of how to boost activity, AMI argued that a simple first step would be to review the current Stamp Duty Land Tax and where it is applied.
“Anecdotally we hear that older homeowners have the appetite to downsize but either cannot find appropriate housing in the right location or delay moving due to the disproportionately high costs involved,” it said.
“Stamp duty is the lion’s share of these costs, particularly in London and the South East where house prices have rocketed. AMI is proposing that Stamp Duty be made a regional tax to allow it to better reflect local housing market dynamics and free up those who want to move home but cannot afford the tax bill to do so.”
It also called for a review of whether Stamp Duty could become a tax paid by the seller rather than buyer – or whether sellers over state pension age could make one sale and purchase and defer the final stamp duty payment until final sale of that property.
“This is unlikely to be agreed in the short-term given pressure on UK finances but could have a significant impact on buyers’ affordability and attitudes in the long-term and should therefore not be thrown out as unrealistic,” it added.
Proc fees help consumers
The quarterly economic report also identified the importance of proc fees.
It raised fears that replacing proc fees with direct customer charging, as introduced by the Retail Distribution Review for investment advisers, would exclude the most needy customers from receiving mortgage advice.
“In order to pay for the cost of giving advice – and the cost of advice given on applications that do not complete, removing proc fees in favour of charging the customer is likely to deprive the most vulnerable from advice they badly need,” AMI said.
“This is particularly troublesome in a market where the most vulnerable customers may have to take advice to purchase a product but cannot afford the advice in order to do so.”
It added that referral fees help service this advice market within the current charging structure: “In order to minimise cost and risk within the constrictions of existing regulation, but not compromise on the quality and breadth of advice given to customers, advisers have adopted a referral structure. This serves customer needs well and allows advisers to remain commercially viable.”
