Mortgage advisers 'fail consumers'
Updated on 23 July 2008
Fewer than one in 10 mortgage intermediaries are providing acceptable advice, putting consumers at risk of taking out an unsuitable mortgage, a consumer group has warned.
Which? Money said four out of 50 advisers based at banks, estate agents and individual firms visited by its researchers during a mystery shopping exercise provided adequate advice.
The group said 41 intermediaries failed to provide the researchers with at least one piece of key information, while 35 failed to properly check whether the individual could afford to repay their mortgage.
Instead they seemed more concerned with selling insurance products, on which they earn commission, with two-thirds trying to sell some cover, despite the fact that it was often unsuitable.
Banks were particularly likely to try to sell insurance, with one adviser concentrating more on selling the insurance than on advising about the mortgage, while another gave quotes for insurance that totalled more than £100 a month, despite the researcher saying they already had some sickness cover through their employer and they were on a tight budget.
The researchers, who posed as first-time buyers who knew nothing about mortgages, also found that many advisers took a 'one size fits all' approach, without bothering to examine their personal needs in detail.
Less than half of the advisers explained the level of service they were providing, making it clear whether they were offering advice or just information.
One adviser also dismissed the key facts document giving details on a mortgage and which they are required to show customers by City watchdog the Financial Services Authority, saying: "A lot of the stuff in there is just blah, blah, blah."
Another dismissed the idea that interest rates might fall again when recommending a fixed-rate mortgage, despite the fact that rates were cut just weeks later. A third adviser even tried to use Kylie Minogue's breast cancer to persuade a researcher to buy critical illness cover.
Twelve of the advisers recommended the researchers had a mortgage term that was longer than the standard 25 years, without explaining that this could cost them thousands of pounds more in interest.
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