Commission levels on all point-of-sale products, including mortgage-related insurance, could be scrapped if plans for statutory mortgage regulation are given the green light.
Ian MacQueen-Sims, a member of the Financial Services Authority’s (FSA) mortgage advisory panel, said the idea had been widely trailed in government and could come into force alongside the statutory regulation of mortgages.
He said: “As I understand it this would effect commission to lenders, brokers and IFAs. The reasoning behind such a move is that when you have a situation where the adviser – albeit a lender or an intermediary – earns more commission out of peripheral products as opposed to core ones, you are going to have abuse. If you target the cause of that abuse you remove a lot of the problem.”
Whether all commission at point of sale will be eliminated or whether the Government opts for a full disclosure regime instead is, as yet, undecided.
MacQueen-Sims added: “Do you say you cannot sell insurance products at point of sale? Do you say that if you sell insurance products you have to disclose the amount of commission received and not just as a percentage? Or do you scrap commission levels altogether at point of sale? That question is still up for grabs.”
With the threat of commission levels being withdrawn at point of sale, industry commentators say it will not be long until lenders develop products that would bundle together the likes of MPPI, ASU and possibly buildings and contents cover in one package.
“If lenders wrapped MPPI into the mortgage it would represent a net-only rating that makes the whole question superfluous.”
A spokesperson for the FSA said it does not yet regulate mortgages or general insurance. But Harry Hill, managing director of Countrywide Assured Group, said: “Why would anybody sell anything if there is no money in it? I would have thought it was a completely naïve and ridiculous suggestion.”
Hill, whose firm is currently planning to expand its estate agency network from 730 offices in the UK to 1,500, added: “People in the mortgage arena already have a cooling off period, because while they may sign a mortgage proposal this afternoon, the chances are they will not enter into a detailed commitment to take that mortgage for six to 10 weeks.
“If a combined MPPI, ASU or buildings and contents mortgage was available as part of our menu of products we would be happy to offer that to the public.”