- June 8, 2018
- Posted by: admin
- Category: UK Mortgage
Are mis-sold mortgages a problem for Banks and Brokers?
A small proportion of experts are advising mortgage brokers and lenders not to get in a frantic panic over potential mortgage misselling.
Claims management companies (CMC’s) take a different view however, as they begin to eye up this emerging market market.
Lets face it, the previous financial scandal (Payment Protection Insurance) is coming to an end in 2019 and that feeding frenzy resulted in millions being earned in commissions from successful claims. This hungry brigade of CMC’s need to move their resources somewhere. Why not target the biggest financial commitment a person would ever make in their lifetime? It’s rich pickings for them and the affected consumers they represent.
Which Mortgages have been missold?
Mis-sold mortgage products include, interest only, endowment, self-certification, right to buy, added with generally all round poor and inadequate advice and you have a miss-sell! CMC’s are also stating that debt consolidation, securitised mortgages as well as sub-prime mortgages are also in the line of fire.
How BIG are the potential claims?
Both the brokerage industry as well as the actual lenders could face extremely high fines. Claims can range in size from £15,000 to a staggering £1.3 million!
What does the mortgage industry say about this?
An interesting comment has been made by the chief executive of The Association of Mortgage Intermediaries who says: “There will be an attempt by firms to attack certain aspects of the mortgage market. So far, these have not got very far.”
He does in fact acknowledge that some claims will be successful, but says: “I don’t see fundamentally systemic issues coming out of this, where they will find a rich vein of liability to go at.”
An attempt to dampen the fire perhaps? Lets see…
To balance this statement, one such CMC has so far referred over 3,000 claims to date since opening its doors since September 2017. They are training their panel of solicitors based on counsels opinions and their own high level vetting and due-diligence of potential claims.
They have received over 30,000 inquiries and expect to grow their staff levels from 110 to 250 by the end of 2018.
Based on that level of commitment, brokers and banks need to be very concerned!
Financial Ombudsman Service (FOS) say they will apply their own “fair and reasonable test”
Despite no mandatory FSA mortgage regulation, the jurisdiction of the FOS means that mis-sold mortgage claims can still be escalated to them who will apply their own “fair and reasonable test”.
Lets not forget the underlying principle; advice given to consumers in relation to mortgage advice must comply with the statutory principles of treating customers fairly as stipulated by the Financial Conduct Authority (FCA).
Lenders Independant Financial Advisors (IFAs) must ensure their customers fully understand the costs, features, benefits and more importantly the full risks of the financial products they sign up to. They are also obliged to reduce the sale of unsuitable financial products by ensuring best practice before, during and after the sale has been made.
Check out our latest infographic detailing how big the problem really is for UK banks and brokers.