The Financial Services Authority (FSA) has published new rules to protect mortgage holders, which include a recommendation to consult only ’fit and proper’ persons by taking qualified, independent financial advice.
In general, the drive of the FSA guidelines is to limit the number of homeowners who eventually find themselves in difficulty keeping up with their mortgage repayments.
By ensuring that the financial planning advice offered to those buying a mortgage comes only from fit and proper persons, such as an independent financial planner or other qualified provider of financial advice, homeowners can be more certain of taking on mortgage repayments that will be sustainable and manageable in the long term.
The benefits of independent financial advice were proven in a report by the Association of Mortgage Intermediaries (AMI) which stated that independent mortgage advice will save the average mortgage holder £962 per year in mortgage repayments.
This is because an independent mortgage adviser can take a ‘whole of market’ approach, comparing all mortgages on the market, to the best deal for the customer. Equally, independent remortgage advice will also identify whether staying with the existing lender or moving to a new deal is in the best interests of the customer. An adviser employed by or affiliated to a single lender, on the other hand, can offer only their own in-house range of mortgage deals.
The FSA’s guidelines also cautioned mortgage holders who are considering using ‘sale and let back’ companies to free up capital in their homes, by selling their home but continuing to live in it as a tenant. The FSA recommended security of tenure for sale-and-let-back customers for at least 5 years, and a 14-day ‘cooling off period’ for those opting to sell their home under such arrangements.
