The Financial Services Authority has issued a bulletin on financial promotions of mortgages, advising firms on several issues they can take into account when designing their own promotions.
The bulletin states the overarching principle for financial promotions is they should be “ clear, fair and not misleading” and how a firm seeks to meet this principle is the decision of each firm and its senior management.
But, it adds that when assessing the principle, firms might wish to consider the following issues:
- A cash lump and/or income from an equity release scheme may reduce the consumer’s state benefits;
- With a roll-up mortgage, the outstanding loan including the added interest can grow very fast and if the total rises to more than the value of the property this would result in a negative enquiry; and
- An equity release scheme will reduce the value of the consumer’s estate.
The bulletin raises particular concerns about the potential vulnerability of customers of lifetime mortgages and says this “accentuates the need for clarity”.
It adds that the FSA believes the risks associated with lifetime mortgages should be “explicitly stated” and requires firms to include the prescribed risk warning when promoting lifetime mortgages: “This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.” The warning is required regardless of whether a specific product is mentioned.
The bulletin also clarifies the way promotions should deal with APRs, charges and fees, product features and risk statements.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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