According to Andy Frankish, technical director at Mortgage Talk, recent house price inflation has resulted in some council house right to buy tenants being sold mortgages that are inappropriate to their needs.
And Frankish reiterates the advice that Mortgage Talk gave some time ago to anyone contemplating taking out a right to buy mortgage. 'As house prices have continued to spiral in the two years or so, many council house tenants have felt under intense pressure to buy their own home. As a result, some borrowers have taken out mortgages that they will struggle to pay, if interest rates increase even slightly over the coming months' counsels
Frankish.
'Although I firmly believe that everyone should have the ability to exercise their right to buy, many borrowers are simply being sold the wrong product by unscrupulous doorstep salesmen. These may well have punitive rates of interest, or extended tie-ins that, in many circumstances, are just not pointed out to the borrower,' he adds.
'The responsibility for selling these products lies with mortgage brokers themselves. Any reputable broker should undertake an affordability calculation, to pre-qualify applicants looking at these products. And brokers should be duty bound to point out any conditions that attach to the mortgage, such as early redemption penalties or extended tie-ins, before proceeding,' says Frankish.
'Moreover, a good broker ought to explain the significance of the client's monthly commitment, and should produce a statement, in plain English, clarifying the implications of failing to meet their obligations. This should be signed by the client, as an acknowledgement,' he states.
Frankish believes that the only way in which this type of practice can be avoided in the future is for all mortgage brokers to be accountable for their actions and advice, in the same way as other professional advisors. 'Mortgage advisors have a moral duty to their clients to give best advice.
Although industry compliance regulations are tougher than ever before, the best way to ensure that brokers give appropriate advice is for the industry to have the same degree of recognition, accountability and status as professionals such as solicitors. After all, bad advice from a mortgage broker can be just as catastrophic as that from a lawyer,' he concludes.
