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The challenges facing the larger mortgage lenders could not be more intense. With house prices coming off their peak in London, the start of the withdrawal of Help to Buy, more new entrants and larger players like HSBC and TSB taking market share, base rate at record lows and having to manage ring-fencing and horizon changes to capital and liquidity requirements, the agenda could not be more complex.

With residential mortgages being seen as a cornerstone to income and profitability, acquiring more and retaining what you have already got has become core to success. With branch networks now a huge cost and resource liability, combined with issues on legacy systems and cyber crime, there are few quick fixes. Most scale players also still have PPI and Plevin liability to work through, problems in the handing of arrears and other past business reviews that are slowing innovation.

The Mortgage Market Review ended up being all about advice and the last 3 years saw many big lenders not investing in getting their branch and telephone operations fully qualified to deliver advice through people. What we have seen is a huge move to offer execution only, particularly as a retention tool, initially via letter, but now through scale investment in web portals to allow their borrowers to pick a new rate at the end of their current reduced rate period.

This means that it is likely that about £100bn of mortgages are re-arranged each year on an execution only basis. What has become a subject for debate is what liability does the introducing broker still have following a product transfer? Has the property been revalued to deliver the right rate for the customer? Have they been encouraged by waiving of ERCs or special exclusive interest rates to avoid taking advice? After the product transfer does the customer still have full FOS rights?

Where lenders are deploying IT solutions that ask a series of questions with supporting help screens does this truly meet the definition of Execution Only? In the intermediary world disclaimers are not accepted by the regulator to avoid our advisory responsibilities. It must be hoped that purely by labelling a web portal as not providing advice that it is not carved out. As the existing lender offering a new rate they must be on the hook as advising.

Robert Sinclair
Chief Executive, AMI
October 2016


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