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Dual pricing ‘is dangerous territory’ that will only encourage naïve customers – Star Letter 22/11/2019

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  • 22/11/2019
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Dual pricing ‘is dangerous territory’ that will only encourage naïve customers – Star Letter 22/11/2019
Each week Mortgage Solutions and its sister title Specialist Lending Solutions select the best contributions from readers as Star Letter.

 

The first set of comments were in response to the article: Mojo reveals deal with lenders to offer cheap execution-only mortgages. 

Gary Price led with his view which said: “This is dangerous territory; I regularly meet with customers who think they know what they want until they don’t.  

“A recent example of this would be a customer who came to me looking for a two-year fixed rate like for like remortgage, this was mostly because his friend had just done a two-year fix and thought it was a great deal, despite it having an enormous product fee.

“Through detailed discussions about future plans it was established that a five-year deal with a lower product fee was more appropriate and in fact was cheaper than the two-year deal that his friend was recommending.  

“The best part is the customer was taking a year out in 12 months’ time to go travelling – good luck with remortgaging in two years’ time,” he added. 

He continued: “Everyone’s an expert these days and proposals like this will only fuel naïve customers who only look at the interest rate and do not consider the many other factors that should be taken in to account when reviewing your mortgage options.” 

 

Incentives push the customer

Stuart Philips agreed that there was much risk to this approach.

He added: “Combined with dual pricing, of course customers are going to seek the cheaper option. 

“It only takes one post on MoneySavingExpert to give the secret to getting these products. Then there is no way to know if customers are really getting positive outcomes at all until the complaints start rolling in years later.” 

“I’m fine with execution-only, not everyone needs advice, but incentivising one path over another essentially forces the customers hand, consciously or not,” he said. 

Terry Arch also weighed in on the discussion as he said: “All the millions – if not billions – spent on complying with regulations and effectively outlawing execution-only to go back to square one.” 

 

Too much caution is not productive 

In response to the article: IMLA calls for reform of ‘excessive’ stress tests and stamp dutyJohn Azopardi said: “I couldn’t agree more with the comments regarding stress tests.

“If we prepared each winter for 15 centimetres of snow no one would get any work done. Imagine the cost of unnecessary gritting.  

“[It’s the] same thing with mortgages. There must be a way of coming up with a reasonable stress test formula.” 

 

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