Mortgage Market Review and Direct deals

mortgage market review

Does the Mortgage Market Review leave Direct Deals Available?

Direct deals are mortgage products offered through the lender’s own branches, online, or over the telephone, rather than through intermediaries (Mortgage Brokers).

These sales have not previously had to be ‘advised’ but will come under mortgage advice legislation in April.

Whereas mortgage lenders have in the past been able to treat a direct mortgage product transaction as a sale using minimally qualified and trained staff, they will now have to do ‘advise’ the customer under the terms of the Financial Services Markets Act.

In practice this means that lenders offering direct deals will take more details from the customer using additional qualified and fully regulated staff. This leads to more paperwork and more data and records. The additional regulatory load on the lender affects their business model and their costings.

Ultimately, the cost of this increased regulation and risk needs to be paid for and therefore we may see the cost of direct deal mortgages rising.

The borrower will now be more aware of the terms of their dealings with the lender. Customers can expect to spend much longer in branch or on the telephone to transact their business. This may prove too much hassle for some in order to access what is a single product range.

Direct deals and mortgage brokers

A direct deal is a difficult product for a mortgage broker to be involved in, whilst they may make the clients aware of a direct deal, Mortgage Brokers are not in a position to advise on it or provide an illustration – this is because lenders offering direct deals do not support Mortgage Brokers with the necessary information.

As a result the new legislation states that a Mortgage Broker does not have to consider direct deals as part of its services. If direct deals are not considered this must be noted in the Mortgage Brokers terms of business.

coming tomorrow…Mortgage Market Review and Interest only Mortgages

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