There are numerous reasons why people remortgage. Essentially it boils down to reaching the end of their current special rate, wanting to save money on a better rate, and wanting to increase borrowing or release equity to fund a commitment.
The driving force behind many people’s decision to increase borrowing on their mortgage is often the need to consolidate debts. And why shouldn’t they?
If you have, for example, recently spent £20,000 on a credit card in order to renovate your house, and you’re paying the minimum amount each month while accumulating interest at roughly 20 per cent, then it might be a better decision to add that money to your mortgage where the rate is a lot less.
This is part and parcel of the provision of a remortgage advice service. Advisers would normally conduct this type of business with their eyes closed.
And yet, for certain advisers this type of remortgage plus additional borrowing in order to pay off debts business, is now off limits.
They are essentially being stopped from doing a core part of their advice work, seen by some as too risky to take on.
The fear being that a move from short-term to long-term debt and unsecured to secured lending will be frowned upon and could eventually lead to sanctions and punishments.
Other advice areas restricted too
There are other areas advisers are being told to steer clear of – such as limited company buy-to-let or bridging or later life.
It means their range of work is slowly being eroded, along no doubt with their client base, who having seen that they can’t be helped when they need it, are much more likely to go elsewhere.
And where is elsewhere? It is increasingly likely to be the aggregators or the online advisers.
In other words, in the current environment where direct threats from lenders, and execution-only operators, continue to grow, the very principals and bosses of advice firms who should be protecting their advisers are actually inflicting something like ‘death by a thousand cuts’.
They are driving the very clients who need advice, down routes where they are less likely to get it.
Advisers who currently find themselves in such a predicament, probably need to ask themselves how long can this be sustainable?
Are you allowed to do this type of core business? If not, why not? And if not, perhaps you need to move on.