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People come first not products

by: Alison Beech
  • 14/06/2011
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People come first not products
The announcement of the arrangements for the Queen’s Diamond Jubilee got me thinking about how life has changed since Her Majesty came to the throne in 1952.

Even in the usually relatively stable financial services world, things have happened which would have been previously unimaginable. But is the change really any more significant or is it just different?

There’s been lots of chatter (and Twitter) about interest-only mortgages and first-time buyers.

Views vary, with some saying that buying a property on an interest-only mortgage is essentially like renting and others arguing that there’s nothing wrong with it, as the purchaser will still benefit from any uplift in equity over time.

Aren’t both views potentially right? And doesn’t this point to the need for independent financial advice when considering whether an interest-only mortgage is the best option?

Radio 4’s Today Programme recently covered the subject, inviting two economists to discuss the relative merits.

They were looking at the issue from the perspective of when and by how much interest rates might rise, and what movements we would see in house prices in the medium term.

Both are important considerations and I’m not discounting their views but, for me, they missed a crucial factor – borrowers’ unique and individual circumstances. Not only their financial position, but also their hopes, dreams and aspirations, things which should always be considered, no matter what the UK’s economic situation.

It is only by properly understanding the human and financial dimension that decisions can be made about if, and how much, an applicant should borrow and what type of products are going to suit them.

One-size-fits-all statements that “interest only is wrong” and “repayment is right” help no one and further confuse an already perplexed and wary consumer.

Of course, prospective borrowers can and should research the market and review their own circumstances thoroughly before making decisions.

However, surely if there was ever a need for good quality independent financial advice, it is now. Decent advisers will also recognise that someone not currently in a position to buy is still likely to have financial planning needs.

It is also vital that the regulatory framework reflects that people are at the core of the process.

Regulation that can sensibly and safely accommodate the shifting needs and dreams of individuals will provide a fertile terrain to stimulate growth and innovation. It should be an enabler, not a disabler.

So, as the nation prepares to commemorate a remarkable sixty years on the throne, we will also adapt to the changing environment. Because that is what humans do.

Alison Beech is business relationship director at Spicerhaart

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