Colin Snowdon, managing director of Freedom Lending, said he found it difficult for lenders to justify and brokers to advise on non-conforming products such as a one-year discount with a two-year overhanging ERC. He also questioned whether this was an area in keeping with the issue of ‘ Treating Customers Fairly’ (TCF).
Snowdon said: “Lenders need to justify the need for these toxic, old overhanging ERC products and brokers have to ask themselves if this is the correct advice for clients. Lenders and brokers are too focused on churning applications.
“ We, as an industry, have to take responsibility to aid people with adverse credit and use products with the aim of helping them towards prime status and not forcing them to face high ERCs and remortgage costs.”
David Hollingworth, mortgage specialist at London & Country, said: “I agree there is less need for the broker to recommend these products as more two and three-year deals with low or no ERCs are becoming widely available.”
Simon Biddle, head of marketing and communications at Infinity Mortgages, commented: “It’s about consumer choice; heavy discounts may be very attractive to a certain type of borrower. Advisers must use their discretion when advising on such products.”
• Freedom has launched a number of enhancements to its product range including a three-year stepped discount with rates starting from 4.58 per cent with no overhanging ERCs which is available on its standard adverse range of mortgages. Other enhancements include the availability of free legals on all remortgages in England and Wales and an increase in the maximum loan size to 85 per cent LTV. The range is available from 1 November 2005.
