Jul 21 – Stamp duty: Homemovers

The stamp duty intervention has been the catalyst that’s enabled many to achieve their property dreams or pushed forward existing plans. But the real driver has been the pandemic. Many of us have re-assessed our lifestyles, had our health put into sharper focus or adopted a ‘carpe diem’ mentality. This drive is unlikely to come to a sudden halt, as we continue to adjust to the ‘new normal’ including, for many, hybrid ways of working. This may cement moving plans for those who were unable to see these come to fruition during the last year because of a variety of factors, such as not feeling safe to move until they were fully vaccinated.

As we look towards the final tapering of the stamp duty intervention at the end of September, consumer demand for mortgage advice is set to remain strong. With price differentiation between two and five year fixes still at their lowest levels and interest rates, according to economists, set to remain at historic lows of 0.1% until 2024, mortgage advice can be crucial to help home movers unpick the myriad of options available and assess what product meets their current and future needs.

Whilst intermediaries are naturally skilled at drawing out a customer’s thoughts, feelings and attitudes, the question for all mortgage intermediaries to consider is: does the customer file replicate this clearly enough? The FCA’s review into later life lending published last year talks about documenting soft facts and ensuring that a customer’s voice can be ‘heard’ in the file by recording a customer’s own language and phraseology. Evidence of suitability of advice is key regardless of the type of mortgage product, and where suitability reports/letters are used, personalisation can help to avoid an over-reliance on generic statements.

This approach can also make it easier for an intermediary to confirm back to the customer their understanding of the customer’s demands and needs, explain how the advice relates to individual circumstances and provide rationale for their recommendation. This can result in a smoother and more straightforward application of the FCA’s cheapest rule, as the rule is designed to be a final check where there is more than one product that meets the customer’s needs (and the recommended product is not the cheapest).

A customer moving home also presents an ideal opportunity for mortgage intermediaries to raise protection. The Insurance Distribution Directive requires demands and needs statements to be supplemented with specific information supplied by the customer. However, firms may wish to use this as a ‘springboard’ to discuss with a customer how their preferences have been factored into the advice given and consider where and how the demands and needs statement is displayed in customer facing documentation.

We have seen Financial Ombudsman Service (FOS) adjudicator rulings that take file records into account as contemporaneous evidence. It is important for records to be detailed and customer specific to help protect against potential future CMC activity.  The industry does a fantastic job supporting home moving clients and ensuring the file has a strong customer voice can improve customer outcomes and help intermediaries to demonstrate the important value of advice.

Stacy Reeve – AMI

July 2021