David Miles has published his interim report into the long term fixed rate market in the UK.
There are three matters AMI will be laying before David Miles as he proceeds to the next phase of his review:
* If the UK is to move to long term fixed rate mortgages, there will be a need for advice because it is necessary to evaluate risk. There are short and long term risks to be balanced and, if borrowers are to lift their gaze from short term discounts, professional advice will be crucial.
* In a market as liquid as the UK, consumers will inevitably be attracted by short-term lower mortgage re-payments - especially if they feel that they can switch to equally advantageous terms later. This is rational behaviour. Borrowers expect their advisers to help them meet their financial objectives - and the UK has been very successful in developing a sophisticated re-mortgage market - that benefits the consumer.
* The FSA has stated that, with the introduction of statutory regulation, any adviser wishing to call himself "independent" must offer borrowers the option to pay a fee.
Miles states: "Borrowers need to be helped to understand risk better and to make more forward-looking decisions and lenders enabled to fund loans and handle risk in the most cost effective way." AMI believes this can only be achieved through borrowers receiving professional advice on their mortgage options.
Chris Cummings, Director of AMI, states: "David Miles has recognized the central role of advice in ensuring borrowers make the right mortgage decision. Professional mortgage intermediaries can help customers balance the attraction of short term discount periods against long term fixed rate certainty.
"Until long term fixed rate mortgages are priced attractively, there is little incentive for borrowers to select them. Long term fixed rates may bring certainty - but if it's certainty at a higher cost, few people would be convinced.
"We look forward to working further with David Miles' review. There is more work to be done so that the actual role of the mortgage intermediary is adequately clarified."
