Previously the regulator had stated that lenders should take into consideration the impact of future interest rate rises on first charge mortgages when considering affordability by determining the rate.
However, last week, the FCA announced this would no longer be the case after concerns that consumers may not be aware of the interest rates on their mortgage and, as such, this could cause costly delays to the process.
What’s interesting is that this once again raises the issue of responsibility. In the intermediary sector there is certainly still some confusion over who is responsible for the client when a secured loan is offered. I fear many brokers are unaware of where their responsibility ends when selling a loan.
Simply referring a client to a secured loan broker and believing your job is done is dangerous and could result in repercussions further down the line.
For example, a mortgage broker has a client who is on a 2% base rate tracker, which he wants to keep. He currently has £150,000 on his mortgage and needs another £50,000. The broker recommends the secured loan route and therefore hands the case over to a secured loan packager.
The broker is expecting the client to get a loan at around 8%, which would give him a much better deal overall than losing the tracker by remortgaging.
However, what the broker doesn’t realise is that when the packager looked at the case the only product suitable for the client had a rate of 14 or 15%. Because the broker has not followed up the case he isn’t aware of this. Should that client believe at any point that his loan was mis-sold and that a remortgage was the better option, it is the broker who will take the flak.
Just because you aren’t involved in choosing the exact product the client is given this does not mean you are absolved of any responsibility for it.
As such it is essential that you maintain oversight of the case and can give clear evidence, through proper documentation, why such a path was chosen.
Steve Walker is managing director at Promise Solutions
