The research, to look into how issues of mortgage affordability are being dealt with in the initial mortgage sales discussion, is the last mystery shopping survey to be commissioned by MCCB ahead of the Financial Services Authority (FSA) taking over regulation of the mortgage market on 31 October 2004.
The mystery shopping study was conducted by independent market research specialists NOP World and involved 100 assessments throughout the UK.
The research showed that 96 per cent of mortgage consultants in the assessment were considered ‘professional’; 98 per cent of mystery shoppers said they felt comfortable giving personal financial details to the mortgage consultant; and 97 per cent reported their consultant had a friendly manner. Overall 95 per cent of mortgage consultants were thought to be knowledgeable about mortgage products and the application process.
In terms of what was covered during the initial discussion, 94 per cent of mortgage consultants asked assessors for their income, and 66 per cent asked if they had any available savings. 34 per cent were asked for a present monthly rent or mortgage repayment figure, and just over one-fifth were asked if they had ever missed a monthly mortgage or rental payment.
Three-fifths of respondents were asked if they had any personal loans, while nearly half were asked if they had any credit card debt. Just under one-fifth were asked if they had any other debt. Only 24 per cent of assessors were clearly advised to leave enough money to live on when considering different mortgage options.
An additional element of the research undertaken was to examine how affordability is being dealt with in cases where self-certification lending might be an option. Worryingly a small percentage (9 per cent) of mortgage consultants said something that the mystery shopper felt uncomfortable about. This was, primarily, regarding ways to ‘over-borrow’. However, the MCCB said this should be seen in the context of an initial mortgage discussion where the emphasis is on encouraging the customer to return for a full fact-find and interview. It said there is no evidence to suggest that this is happening when advice or information to allow the customer to make an informed choice is being provided in the later stages of the mortgage selection process.
MCCB is recommending to the FSA that it keeps a watching brief in the area of non-advised and self-certification mortgage sales to ensure poor selling practices and encouragement to customers to overstate income in order to obtain higher mortgages are not allowed to emerge in this field. MCCB has already issued its own guidance notes to all registered firms regarding the sale of self-certification mortgages.
Luke March, chief executive of MCCB, said: "Affordability appears to be well covered overall in the mortgage sales process, with any issues raised and lack of detailed fact gathering apparent in initial discussions, being followed-up in the fact-find and provision of in-depth information later in the process. There is, however, definitely scope for mortgage consultants to provide customers with more information during the initial mortgage discussion, particularly on financial matters which may affect their future repayments."
MCCB has, in addition, commissioned a consumer survey looking at the overall mortgage sales process in relation to affordability, including the full advice and information provision process that occurs in full mortgage interviews and fact-finds which will be published in September.
