ASIAN
HOUSE AND HOME
COWBOYS IN THE INDUSTRY
P
rior to the credit crunch of 2007 the number of mortgages sold was at a record high. Most of these were correctly sold, with many of those customers given good and accurate advice by brokers. Unfortunately, there were also a significant number of unscrupulous brokers who sold mortgages that were more beneficial to them and did not have the best interest of the customer at heart. There are a few red flag signs that if you experience you should seriously consider finding another broker: • If you are encouraged to falsify details on your loan application such as income or credit history, you could find yourself taking on a mortgage that you cannot afford. • No mortgage quotation. This is something you should receive before an application takes place. • If you are asked to sign documents without reading them, most things that you sign are legally binding; you should always be given the opportunity to read a document before signing it. • Not putting anything in writing – when in doubt ask for clarifications in writing, if this is refused, assume the worst. There are some common tricks and traps: • Mortgage bait and switch – The bait is the low rate offered in advertising. The rate is then switched once the customer has been hooked into the process. • Mortgage mis-selling – some brokers
are desperate to get clients through their doors. There are a wide range of borrower and property characteristics, and sometimes the broker may not sell the products that most suits the customer for the best price. • Incomplete variable rate mortgage disclosures – if offered a variable rate mortgage the customer should always ask – How long will the rate quoted last? What will happen to the rate after the initial rate period? • No Cost Mortgages – there is NO SUCH THING as a no-cost mortgage. • Mortgage churning – brokers encourage clients to refinance with little or no real benefit to the borrower, simply so that they can collect fees or commissions.
“Unfortunately, there were also a significant number of unscrupulous brokers who sold mortgages that were more beneficial to them rather than the consumer”
However, the good news is that the Financial Services Authority is making changes to the way that they regulate financial organisations from 2013. This aims to protect customers from dishonest and badly run firms and to ensure that customers are always treated fairly.
From 1st January 2013 to use the word “Independent”, an Adviser is even more rigorously monitored by the FSA and will have to complete a series of examinations to ensure they are competent. In addition they will be regularly checked, by taking part in a system of “Continuous Professional Development” to ensure they maintain that level of competency. These changes in regulation aim to raise the quality of financial advice and give you a much clearer understanding of the type of advice you are getting and what it costs. To summarise, mortgage brokers are there to help you secure the best mortgage for your circumstances. He or she will single out the mortgage most suited to your circumstances, negotiate on your behalf with the lender and, ideally, get you a better deal than you could have done yourself. When having a meeting with your broker, you should be as prepared as possible in order to get the maximum benefit. Make a list of your circumstances and what you need from your mortgage. You should always ask questions if anything the broker says is unclear. Ask him or her to explain exactly why they are recommending a particular product or provider. Afterwards, if you have any further questions, do get back to your broker as they will be happy to help, or just provide reassurance if that’s what you need. Brokers generally prefer feedback from clients, as this will improve the quality of advice they provide. Financial Advisor Pank Parekh MPI Investments Ltd HOUSE AND HOME
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