The Post Office is going to place mortgage specialists in its branches. But that doesn't mean you'll benefit from any advice.
Last week the Post Office announced it will introduce trained mortgage specialists into its branches to help borrowers who want to get a homeloan.
Sounds like a great addition to its mortgage offering, doesn’t it?
Well not to everyone.
Can’t advise, won’t advise
Critics of the scheme argue that the Post Office’s use of the phrase ‘specially trained mortgage specialists’ could confuse customers, who might expect that they will be receiving mortgage advice - which they won’t be.
The Post Office says the specialists have been introduced to assist customers through the mortgage process, because it’s one of the most important financial decisions you can make.
However, it sells its products on a non-advised basis, so the specialists will only be able to offer you information on its products, not advice. So there will be no recommendation on which deal is most suitable for your needs.
Know how your mortgage is sold
How you are sold your mortgage is very important because the two options are very different. You need to be clear what each one means, and what you are getting.
Advised sale: This is when you receive a personal recommendation, which is individual and specific to your circumstances. Whoever gives you the advice – a broker or lender - must be qualified and authorised. The advised product must be affordable, appropriate to your needs and circumstances and the most suitable of those products within the adviser’s scope.
If they advise you on a mortgage that later turns out to be unsuitable you may have right of redress.
Non-advised sale: You receive no personal advice but you are given information that enables you to make an informed decision. For example a lender may ask you a series of set questions to whittle down which of its products may be of interest to you. These questions must be scripted in advance.
However they do not offer you specific advice or actually recommend the most suitable product. It's important to note that you are unlikely to have a right of redress if it turns out that the product you have taken is not the most suitable.
Who offers advised sales?
The main group of people that offer regulated advised sales are mortgage brokers. They have to be fully qualified and authorised simply to operate and to advise customers on mortgages.
It is also possible to transact on a non-advised basis with a broker if you prefer, but this isn’t the norm.
With lenders the picture gets a bit more confusing and this is where you need to have your wits about you.
[SPOTLIGHT]Some lenders do not offer advice at all, such as the Post Office and new lender Tesco Bank. Instead you take out their deals on a non-advised basis, so you will be asked a series of pre-scripted questions and given information based on your answers. They will not recommend a specific product.
Other lenders have both advised and non-advised approaches. It might depend on whether you take out your mortgage through one of their branches, online or over the phone.
What about the big six?
The big six lenders told me they offer both advised and non-advised sales in branches, depending on what the customer wants. HSBC says that 90% of the mortgages applications taken through branches are advised and the figure is 70% for RBS and NatWest.
With the telephone services there is a split. HSBC, Santander, Nationwide and Barclays Woolwich all offer a non-advised service only, although Barclays Woolwich said it is currently training its telephone staff to be able to offer full mortgage advice.
RBS, NatWest, and Lloyds Banking Group (which includes Lloyds TSB, Bank of Scotland, C&G and Halifax) all offer customers the choice of an advised or non-advised sale. Lloyds Banking Group notes that most telephone mortgages are done on a non-advised basis due to customer preference.
When it comes to online mortgages, there are no advised sales from the big six – they either operate on a non-advised basis or the website refers customers to use the telephone service.
All the lenders, apart from HSBC, also distribute mortgages through regulated mortgage brokers, sometimes under the same brand name, sometimes different. These sales are virtually all advised.
As you can see it’s easy to get confused. However both lenders and brokers are legally obliged to tell you at the beginning of any mortgage conversation on what basis they can sell you the product – advised or non-advised. If this isn’t made clear, always ask. It will also be in the Key Facts about our Mortgage Services document they give you (or post to you).
Which is best?
It’s not a case of either an advised or non-advised sale being better, because it completely depends on your circumstances and your level of financial knowledge.
Perhaps you work in financial services, or have taken out mortgages before, and are confident that you know exactly what deal you want. In which case you may be perfectly happy to transact on a non-advised basis.
That’s not the case for many borrowers, particularly first-time buyers, those with unusual circumstances, or customers who don’t feel confident about their financial knowledge.
They may prefer an advised sale because the adviser says exactly which deal is best for them. It can be reassuring to have a qualified expert give you a personal recommendation.
Both options have their merits, but when lenders introduce face-to-face ‘mortgage specialists’ there is clearly a risk that borrowers may be under the false impression they are receiving advice – even though the small-print states that they aren’t.
New rules
This could change soon with the introduction of new rules for the mortgage market – which look specifically at the issue of non-advised and advised sales. The Mortgage Market Review proposes that sales should be advised where there is ‘spoken or other interactive dialogue with the consumer’. This means that all face-to-face and telephone mortgage sales would need to be available on an advised basis.
The changes are not yet confirmed, but they would provide some clarity to consumers. Unfortunately they would also cost lenders a packet in training up all relevant mortgage staff to adviser level.
And who do you think will end up footing the bill for that?
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