This week, Mortgage Solutions, is asking: Should lenders agree on a standard format for mortgage offers?
Yes, a standard format would make life easier. Keyfacts illustrations (KFIs) were great, in my opinion, as it was easy to see the details.
European Standardised Information Sheet (ESIS) is less ideal and information is all over the place – again, in my opinion – and not every lender has the same format either.
For example, the mortgage amount appears first with fees added to it – if applicable – often without mentioning this fact. Unless someone reads the small print under the fees section much further down in the document, it’s not always obvious how much is actually being borrowed.
Another one is the purchase price – it might be reflected as “required minimum valuation is £X” or “we assumed a value of £X”. Even if the actual purchase price is higher, because the buyer agreed to proceed despite a down valuation.
While the information contained is largely the same, the actual structure is often different, and we have to scour through the document to spot the details when looking at deal illustrations and mortgage offers from different lenders.
From a broker’s – and probably solicitor’s – point of view, it’d make our life easier to have one format that shows the main details in a simple format. However, clients only normally see an offer from one lender, so for them it doesn’t matter if another lender has a different format.
How do we manage the current situation? We just take it on the chin, just like the complexity of buy-to-let calculations, frequent criteria changes and the moving goal posts in general. The industry is used to nonsense.
You tend to have a fairly standard format for residential mortgage offer, but then a different format – in fact quite a few different formats – for buy to let and equity release. I suppose it would be hard to do a standard format encompassing all types of different mortgages, but having said that, for residential it ought to be possible.
The more standardised situation you can come up with the easier it is for everybody.
Clients tend to be confused either way because they quite often haven’t seen one before and they don’t always follow the ESIS format.
I thought that 20 years ago we’d have a standard mortgage application yet here we are today with nothing like it. I’m not sure we’ll ever get there and that’s the frustration because in my view we should be able to.
However, we tried to work out one day how many questions you’d need for a standard mortgage application for all lenders – we gave up at 600 questions. I suspect it’s similarly complex for offers.
What’s most important is what the client sees because it needs to be clear to them. Brokers get used to dealing with different lenders and they know the different nuances.
The benefit would be a consistent approach for everybody, and people would be able to understand them better because once they’ve seen one, when they move it’ll hopefully be in the same format. As long as it’s in a format that makes sense in the first place.
However, I don’t think we will see a standardised mortgage offer in my generation.
In all honesty, the vast majority of lenders adopt a standard format for a mortgage offer anyway which closely reflects that of the ESIS. Some vary slightly from this, but they all contain the same information in a similar format already.
It could be beneficial for the client to understand an offer, however the vast majority of clients will only see a mortgage offer every two to five years so would not know if they are all in the same format or not.
I do not really find it confusing to come across different offer formats as most lenders make their offers – and rightfully so – easy enough to understand and clearly lay out costs and conditions.
Maybe from a solicitor’s perspective standardisation would make things easier but it doesn’t affect a broker or client much as they are rather self-explanatory.