The trade body has been outspoken in its criticism of the FCA’s mortgages market study, which has encouraged greater numbers of execution-only business.
And in its latest economic bulletin, AMI argued there will be “increased pressure” on lenders to drive business through the execution-only channel.
It suggested this may prompt lenders to design offers that look attractive to borrowers, but which include penalty clauses “that bite at the tail end of the deal period”, in a similar fashion to the discount rates sold to sub-prime borrowers in the run-up to the financial crisis.
The trade body argued that not only would Prudential Regulation Authority rules not necessarily rule out “this type of abuse” but that this form of product design could be classed as an unfair contract.
It stated: “There is a real challenge here, reliant on whether regulators in the future are likely to consider a scenario such as this worthy of customer compensation.
“Much will depend on whether the FCA and/or Financial Ombudsman Service deem lenders and/or intermediaries to be deliberately generating volumes on an execution-only basis to keep costs low and whether the bulk of this volume should actually have been advised.”
Staying silent on Sonia
The bulletin was also critical of the sparse communication from lenders to brokers of the effects of the transition from the London Interbank Offered Rate (Libor) to the Sterling Overnight Index Average (Sonia) on product pricing.
It argued that because of this brokers continue to write business on Libor-linked products without being able to advise clients on how the move to Sonia will affect them.
AMI said: “Not only is this is far from ideal, potentially opening a window of opportunity for accusations of incomplete advice to arise against brokers advising on regulated mortgage contracts in future, it is also in direct contravention of guidance already given by the FCA.”
Developers to blame for new build ‘logjam’
AMI also took aim at developers, arguing that the apparent logjam in the delivery of new homes is their fault, rather than local authorities.
It said: “Restricting the volume of new build starts to the degree that off-plan sales are selling a year ahead of completion and within a month of listing, coupled with stories in the media revealing the aggressive sales tactics being used by some developers cannot be misconstrued.
“This is developers controlling the supply of new homes to maintain unit values.”