Test pre-application illustrations (PAI) have been criticised by the mortgage industry. The overwhelming concern is that they are too long and will be offered to would-be borrowers at the wrong stage of the selling process.
One document for a simple fixed rate repayment mortgage, compiled by Robert Rosenberg, a barrister for Shoosmiths Solicitors ran to five pages.
Mark Smitheringale, head of communications at Skipton Building Society, has seen one test document.
He said: ‘Our problem is that, depending on the product quoted, the illustration can be anywhere between five and 21 pages long. The National Consumer Council has concluded consumers have an adversity to reading documentation, yet a PAI is going to be up to 21 pages long, per product and per product provider. In theory, according to the Financial Services Authority (FSA), a consumer will take all these home, read them, and make an informed choice.’
Robert Clifford, chief executive of Mortgageforce, said documents were also scheduled for issue at an inappropriate time.
He said: ‘I can see a place for them once the product selection has taken place. If it were a comprehensive product information, or ‘reasons why’ document, then there is an argument for that level of information being provided to the client ‘ we are all supportive of transparency and the provision of information to the consumers. But overload of information results in consumers being less informed. It is an impractical and disproportionate amount of information.’
But Clifford hopes the regulator will be flexible and take stock of the industry’s comments. ‘I am hopeful that, given the amount of lobbying and consultation, the FSA will change their position on either the complexity of the PAI, or the timing of it,’ he said.
But not everyone is so optimistic. Nick Baxter, director of network Mortgage Promotions, said: ‘I am not convinced the end solution is going to very different to the original consultation version. It depends on how sure you are the FSA has taken on-board responses from lenders and the Council of Mortgage Lenders. I am not very confident.’