This week provided several insightful comments on a range of subjects, including execution-only and the value of advice, equity release drawdown, and Shariah-compliant mortgages.
First is Andy Wilson’s response to the article ‘People using execution-only will find their journey a lot more challenging than they expected’ – poll result.
He said: “It isn’t hard to get a mortgage. If you are reasonably credit-worthy, have a decent deposit and provable, stable income then most lenders will take you on. What is hard is getting the most suitable mortgage.
“Many of my clients could do this mortgage broking job. With a liberal sprinkling of logic, use of new technology, adequate research tools and analytical skills, they could quite easily find the ‘best’ mortgage.
“However, this takes time and effort, and we have already invested heavily in being able to source the most suitable deals for a wide range of clients. We can also apply our considerable experience.
“Those that go off and try to find their own will usually end up with a ‘good’ deal, competitive in the marketplace and with a reputable lender. It may not be quite the best deal using some metrics, but many would be happy with that.
“I could service my caravan once a year, using Youtube videos, a service manual and a great deal of learning. But I don’t; instead I pay a competent dealer who has experience in all of the caravan’s systems to do it for me. They will be quicker than me, and know pitfalls and bear traps that I might easily fall into.
“I can then trust that when I tootle off to a long weekend away, the gas system won’t explode, the lights will come on, the water will leave the vehicle down a pipe and not via the floor and the wheels literally won’t fall off.
“But of course, it is not the process of getting the mortgage we are concerned with here. It is the fallout afterwards.
“Is the mortgage flexible enough to meet changes in the borrower’s lifestyle or employment? Does the product term reflect big foreseeable changes coming up? Does it provide a safe harbour through the choppy waters of Brexit?
“Does the loan drop back at the end of a product term onto an exorbitant standard variable rate at a time when the borrower has suddenly just become self-employed? And if so, are there adequate product transfer options? What if there is a chance they want to rent the property out?
“Many borrowers could find a mortgage unaided. What they pay us for is to find the right mortgage and take away all of the donkey work.”
Stop treating clients like idiots
The next comment came from Mortgageswithjoy, and their response to the article Maximum drawdown facilities should not be recommended for a bigger commission – Wilson.
They said: “As an equity release adviser I struggle with this concept a little.
“Most (but certainly not all) of my clients are fully aware of the implications of putting this money into a low savings account, but equity release is for the client to spend as they want to, after all it’s their money.
“I find it annoying that the financial services sector takes away the rights of the consumer and treats them all like idiots.
“The problem with the draw down facility is that lenders charge a higher interest rate for this than having it in one lump sum and [one] lender has stated recently to me that further draw downs are not guaranteed when the customer requests them, even if the facility is built in. Future draw downs will be at the prevailing rate at that time which could be higher.
“Ultimately, paying a higher rate on future draw downs could mean faster roll up and bigger debt, but nobody seems to know how to calculate this effect. If the client wants all the money in one go, they should be able to have that choice.”
What is Shariah-compliant?
The final response came from Options Mortgages in reply to the article L&G Mortgage Club adds Shariah-compliant lender Gatehouse.
They said: “I’m curious to know what a shariah compliant mortgage is – I’ve asked Lloyds Bank and Islamic Bank of Britain in the past and both in my opinion are unsatisfactory answers as their benchmark for calculating the ‘rent’ portion is linked to base rates, so it is interest rate linked.
“As a Muslim and a certified mortgage broker of over 25 years I really do think this is a gimmick product.”