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Mortgage adviceBuying financial products or services usually involves trusting strangers to look after your money, so you want to be sure that the firms you deal with are honest, soundly run and are giving you straightforward, reliable information about their wares. The UK system of financial regulation aims to ensure this is the case. The Financial Services and Markets Act 2000 makes it illegal to carry on most types of financial business in the UK without being either authorised by the financial regulator or specifically exempt from regulation. This applies whether a firm provides products, arranges deals involving them, gives advice about them, and so on. The regulator is the Financial Services Authority (FSA). Since 31 October 2004, advice about mortgages is regulated by the FSA. Advisors must comply with rules which are similar to those for investment advice, for example: Type of advice. On first contact, the advisor must tell you whether the advice will be based on products from a single lender (tied advice), a number of lenders (multi-tied advice) or the whole market (independent advice). This information will be included in an Initial Disclosure Document (IDD). Suitability. A recommendation by the advisor must be suitable given the information you have provided about yourself and your needs. In assessing suitability, the advisor must be reasonably sure that you can afford the payments and should draw your attention to any risks, such as the possibility of payments increasing if interest rates rise. Buy-to-let mortgages are not covered by these rules above, nor are mortgages on your home which are not the first charge. To clarify, a ‘first charge’ is the loan that would have to be paid off first if your home were to be sold. Therefore, when you consider the sheer magnitude of financial responsibility that comes with a mortgage, we recommend you consult with a financial advisor. They might recommend that you take out a variety of different financial products, for example, some insurance with the mortgage tailored for your circumstances. The adviser must comply with the advice rules outlined above for each type of product. Confusingly, an adviser might be independent for insurance advice but, say, multi-tied when giving mortgage advice. And, where an adviser is tied to certain companies for one product, he or she might be tied to different companies for another product. In such an instance we suggest that you must check the type of advice that can be offered for each type of product. But take extreme care in not confusing information with advice. Advisers regulated by the FSA must make clear to you at the outset whether they offer an advice service or only information. Some products, such as stakeholder pensions are deemed to be straightforward enough to be sold without advice. You may instead be given or guided through ‘stakeholder decision trees’ designed to help you make your own choice, but this does not count as advice. Whereas mortgage products are so vast and work differently from each other it is very unlikely you will be confident enough to take out the product without some kind of advice. |
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