Written by Stewart Simpson, Second Charge Mortgage Specialist
In many ways, Consumer Duty should provide little concern for mortgage brokers. After all, the core principle of securing good outcomes for the customer is woven into the DNA of most brokers.
However, there are still circumstances when brokers might overlook potential solutions for a client’s borrowing requirements and in these situations, Consumer Duty should provide a timely wake-up call.
For example, where a client has a capital raising requirement, how many advisers will only consider a remortgage or further advance as a potential solution? A remortgage isn’t always the right option, especially if it means a customer incurs Early Repayment Charges, and not all lenders offer further advances.
Often it could be the case that a second charge mortgage is the most appropriate tool for a client who wants to raise capital, but many brokers still fail to offer second charge mortgages, either themselves or by partnering with an expert in the market.
MCOB rules say that firms should always disclose limitations in their scope of service and the full range of options available, but our research shows that many brokers are still failing to even propose a second charge mortgage as a potential option.
This situation needs to change, and the implementation of Consumer Duty requirements may help to drive that change. For our part, at Brightstar, we are working with other parties in the mortgage industry to develop a charter that brokers would be able to sign up for in order to demonstrate their commitment to delivering the best consumer outcomes for a client when advising on a capital raising requirement.
This would include making all consumers aware of all the options available to them, including remortgage, further advance, second charge mortgage, or where appropriate, retirement interest only.
We understand that not all brokers will be able to advise on all options – it’s practically impossible to be an expert across all areas of secured lending. But, where a product lies outside of a broker’s scope, and they cannot offer advice themselves, we think they could commit to making it known to consumers that the product is available, that they are unable to offer it, and that it may offer a more suitable solution for their circumstances.
Of course, brokers may also choose to explore partnering with an expert in that area so that they are able to offer the option to their clients and we are always here to help at Brightstar. But this isn’t the main motivation for the charter. The key driver of doing this is to remind brokers of their duties and ultimately to secure better customer outcomes.