The proportion of bank sales that are advised has been steadily increasing however from 34% in Q2 2006 to 49% in Q2 2011.
The level of advice provided by lenders is somewhat higher for higher-risk borrowers or products with higher-risk characteristics. But there is still a considerable proportion of consumers who do not receive advice through lenders.
The FSA said there seems to be no direct relationship between risk and provision of advice in the mortgage market. Some of the riskiest products were sold without advice.
Overall non-advised sales perform somewhat better but performance varies by channel while among direct sales, non-advised sales overall perform better than advised sales.
For broker sales the picture is reversed with non-advised sales performing considerably worse in comparison with advised. In all cases broker sales - advised or not - appear to perform worse in comparison with direct sales.
The FSA said some of these differences can be explained by the risk profile of borrowers who choose to borrow direct or via a broker.
Its research showed there is not much difference in mortgage performance of mainstream borrowers, regardless of the channel of sale and provision of advice, with both direct and broker sales performing marginally worse where advice was provided.
It said: “This could be because of self-selection of borrowers who choose to obtain advice.
“However for higher-risk borrowers, which we define here for illustration purposes only as those who were credit-impaired, consolidated debts, exercise right-to-buy or borrowed from specialist lenders, there is a considerable difference in the performance of broker sales with non-advised sales performing considerably worse in comparison with advised.”
