The Financial Conduct Authority (FCA) is finalising plans to make execution-only mortgages easier for a wider range of people. The move, deemed controversial by some finance and mortgage experts, yet developed in consultation with over 60 trade and finance bodies, calls for a relaxation of rules around taking out a mortgage, without getting mortgage advice.
An execution-only mortgage means that the mortgage applicant selects a mortgage based on their own research, without taking out professional mortgage advice from a broker. Up until now, this was quite tricky to do in most cases, with the vast majority of mortgages in the UK taken out with advice.
In fact, most people who want to explore execution-only mortgage channels typically found themselves diverted to advice anyway, due to the regulations in place. The FCA's concern was that the, according to the data it was receiving, too many people were ending up overpaying for their mortgage anyway. In addition, those who did manage to access an execution-only mortgage did not have a solid understanding of what protections they were losing along the way, while others just assumed that they had lost all protections, automatically, because they hadn't accessed mortgage advice.
So, what does all of this mean for you, if you are taking out a mortgage or are remortgaging? The implementation period for the new rules has a period of up to the end of July this year, and two changes can happen during this time. One is that the definition of what constitutes mortgage advice will change. The FCA are particularly keen to make it clear that accessing comparison tools isn't necessarily advice, nor is the initial chat you may have with an advisor.
For example, the mortgage advisor may say 'I suggest you look at x type mortgages', but that wouldn't constitute actual mortgage advice. Up to the rule changes, lenders were reluctant to let applicants access execution-only mortgages if they came through an intermediary, but this is now likely to change. This means that you should be able to apply for the mortgage you think is best, even if you are doing so through an intermediary.
On the other hand, if you do choose to take out advice, mortgage advisors will now need to explain why the mortgage they're advising you to take out isn't necessarily the cheapest one. This is in order to dispel the ongoing confusion many people have about mortgage affordability vs. mortgage suitability: the best mortgage for your needs is not necessarily the cheapest.
If you choose to go ahead without advice, you may waive your protections surrounding the mortgage suitability, but not the ones regarding its affordability. Your lender would still have to check that you can afford the mortgage, for example, but you wouldn't have redress if you realised the mortgage product wasn't suitable for you for other reasons.
If this all sounds daunting, don't worry: mortgage advisors and lenders will still need to very clearly signpost (several times) when you are choosing an execution-only mortgage, and to make very clear how that affects your protections if something goes wrong.
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