Mortgage regulation has prompted little dramatic change in consumers' perception of the mortgage market, but negative feelings remain about advisers' behaviour, according to the Council of Mortgage Lenders.
A CML survey of 1,373 adults who took out a mortgage in the previous 12 months found respondents who agreed mortgage advisers "often encourage you to borrow more than you should” rose from 10% to 11%, while those who felt “they clearly tell you what effect interest rate changes will have when you borrow” rose to just 22% from 17%.
In addition, those who agreed mortgage advisers “generally provide clear and fair product information” rose from 43% to 48%, “they are professional and take your needs into account” rose from 31% to 40%, and “they often try to sell you extras you don’t want” fell from 36% to 33%.
The CML states: "Overall, it is still only a minority - ableit a sizeable one - who believe that mortgage sales staff provide good information, are professional, and take their needs into account. This suggests there is still work to be done to improve the robustness and credibility of the sales process, and the professionalism of staff, in the eyes of consumers."
More positively, when asked whether lenders deal with customers openly, honestly and fairly, 91% of respondents said yes and 8% said no, which the CML says is virtually identical to 2004 responses.
But the survey also reveals while three-quarters of recent borrowers shopped around to some extent, there is no evidence to suggest regulation has fostered an increase in shopping around, as the CML says the results are virtually identical to its 2004 findings.
In addition, sources of information consumers use when deciding which mortgage to choose are virtually unchanged as the most common influence is still the recommendation of a financial adviser - cited by 42% of respondents in total and by 37% as the single most influential factor.
Existing relationships with lenders maintained their second position, cited by 28% in total and by 26% as the single most influential factor.
When asked to rate the most difficult thing about taking out a mortgage, the results were also virtually identical in 2005 to those recorded in 2004.
“Deciding which is the best deal for me” continued to top the list at 34% (compared with 35% in 2004), followed by “understanding information given to me”, cited by 21% (compared with 22% in 2004).
The only area cited by marginally more respondents in 2005 than in 2004 was “comparing product details other than costs”, which was regarded as the most difficult thing by 12% of respondents in 2005, compared with 10% in 2004.
When asked how easy it is to compare different deals, there was a small increase in the proportion who said “it was straightforward by looking at the main product features” – up from 33% in 2004 to 37% in 2005.
But there is little noticeable difference in the proportion of people who found it difficult to compare different deals or in the proportion who had not compared deals or who had relied on an adviser to compare deals for them.
The CML says this suggests the new format for the presentation of information to consumers – most notably the key facts illustration (KFI) – has so far had no discernable impact on consumer perception of the mortgage shopping around and the comparison process.
The survey also asked consumers for their views about some of the information which is now compulsory for lenders and intermediaries to give them under the Financial Services Authority’s (FSA) mortgage rules.
Although only 46% of recent borrowers remembered receiving the initial disclosure documents, 66% remembered receiving the KFI and 68% remembered receiving the mortgage offer document.
At the same time, only 51% of respondents said they remembered any general product information, for example on leaflets or websites, which the CML says is lower than expected given respondents had all taken out a mortgage within the past 12 months.
The CML adds: “However, it is perhaps a salutary reminder that there is still a long way to go to encourage a significant minority of consumers to take an active interest in their financial affairs.”
Those respondents who did remember receiving the various types of information said the mortgage offer was the most useful (seen as very or fairly useful by 93% of those who received it), followed by the KFI (88%), general product information (85%) and the initial disclosure document (84%).
Commenting on the survey’s findings, the CML states: “There is no obvious ‘backlash’ to the presentation of information in its statutory prescribed formats, and no evidence the introduction of regulation has, in practice, led to a reduction in the shopping around process. That is not to say the regulatory regime is necessarily working in the optimum way for the industry.”
The CML says the cost and complexity of compliance and the knock-on impact on the efficiency of sales and lending processes remain major issues for lenders, and it believes the FSA should consider whether simplification may be possible over time.
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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First mentioned in Cridland Report