Mortgage News
Brokers back suitability letters
Advisers have backed plans for suitability letters to be introduced as a means of improving advised sales standards in the FSA’s feedback statement to the Mortgage Market Review (MMR).
The document, which summarised the 178 responses received following the MMR discussion paper that was released in October, showed that advisers believe these letters will raise standards.
Suitability letters provide records of why specific advice is given and their adoption will bring mortgage advice into line with other areas, such as investments and pensions.
Elsewhere in the statement, the regulator’s proposal to make income verification a requirement for all mortgages generated a polarised reaction.
Those that supported the proposal argued that everyone should be able to verify income, even if the income sources are diverse or the income streams irregular.
Respondents also agreed that lenders should take ultimate responsibility for ensuring mortgages are affordable for their borrowers.
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Lesley Titcomb, director responsible for the mortgage sector at the FSA, said: “These proposals underline the standards that firms must meet and will help to ensure that homeowners in financial difficulties are treated fairly.”
Ray Boulger, senior technical manager at John Charcol, said he believed the requirement for suitability letters would not make a huge amount of difference as a lot of brokers already use them.
He added: “Most mortgages sold by brokers will contain suitability letters. All good brokers use them and the brokers that do not use them are likely to be the less competent ones.
“The FSA is actually just enshrining in the regulation something that already happens in most cases. It would make more of a difference if there were suitability letters on non-advised sales also.”
Michael Brill, director at Baronworth Services, said all brokers should use suitability letters as a matter of good practice.
He added: “It helps brokers because it means that clients have a record of the advice they have received so they will have fewer grievances. It also reminds the client of what they have agreed to.”