Mortgage advisors fail advice test

An investigation by consumer watchdog Which? finds just four in 50 mortgage advisors are giving "acceptable" advice to homebuyers.

Between February and April 2008, Which? Money visited advisers in England and Scotland undercover, posing as first-time buyers who wanted advice and a recommendation.

The findings, argues the company, were disappointing.

Some 41 out of the 50 failed to provide one or more pieces of key information – which include an Initial Disclosure Document (IDD), a Key Facts Illustration (KFI), as well as making it clear whether they are offering advice or information.

Furthermore, 35 failed to do a proper check to ensure that the individual could afford to repay the mortgage.

Two thirds tried to sell the researcher insurance at the same time – often for an unsuitable product – and many failed to tailor their advice to the individual’s needs, finds Which?.

"Listening to people’s needs and giving tailored advice should be the bread and butter of a mortgage adviser’s job, but too many of the advisers that we visited took a 'one size fits all' approach or seemed as concerned with selling an insurance policy on the side," said Martyn Hocking, editor, Which? Money.

During the research one adviser said of the KFI they must provide "a lot of the stuff in there is just blah, blah, blah", while another dismissed the idea that interest rates might fall, just a few weeks before the Bank of England cut them again.

A third tried to use Kylie Minogue’s recent breast cancer diagnosis to persuade the researcher to buy critical illness cover.

"With mortgage costs soaring and the spectre of negative equity returning to the property market, it’s important that people get help to find the right deal," said Mr Hocking.

"There are still more than 3,000 mortgage deals out there, and the difference in cost can be thousands of pounds a year, so it’s vital people do their homework and choose their adviser with care."

Chris Cummings, director general of the Association of Mortgage Intermediaries (AMI), responded to the report criticising it for not distinguishing between the actions of independent advisers and those who sell products.

“Consumers must be made aware what they are receiving. Independent mortgage advisers provide advice that is wholly focussed on the individual consumer’s needs,” he said.

“In contrast, banks and building societies may offer only generic information.”
 
He added: “During difficult periods in the market, consumers need advice more than ever. Industry figures show that consumers have turned in increasing numbers to independent advisers - the number of first-time buyers using an intermediary increased to 82.5 per cent in the first quarter of 2008, ten per cent higher than in quarter one 2007.”