The report covered 11 lenders, representing more than 50 per cent of the non-conforming market by volume of sales, and 34 mortgage intermediary firms covering 485 customer files.
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It showed that none of the lenders adequately covered all relevant responsible lending considerations in their policies and in many cases failed to apply their own policies.
A third of intermediaries failed to adequately assess clients’ ability to afford the mortgage, while almost half did not assess the client’s suitability for the product. There were also ‘significant’ numbers of consumers being advised to remortgage without there being demonstrable benefits in doing so.
However, no significant evidence of mis-selling non-conforming mortgages to prime customers was discovered.
Clive Briault, managing director of retail markets at the FSA, said: “We are very concerned about these findings. Consumers in the non-conforming market are vulnerable people who may have high debts or a bad credit history. It is important that they are properly advised. We will not hesitate to take action where we find bad practice.”
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“All mortgage firms must ensure they are treating their customers fairly by undertaking robust assessments of affordability and ensuring they have sound, and consistently applied, lending policies.”
Chris Cummings, director-general at the Association of Mortgage Intermediaries, said: “AMI does not defend poor record-keeping. We were surprised at the number of consumers paying early repayment charges to remortgage. While this doesn’t necessarily indicate poor advice, the documentation of the reasons for the advice must be clear.”
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Alex Hammond, PR manager for Kensington, said: “We must not let this detract from the fact that most firms are working with the FSA and maintaining a constant dialogue in regards to improving standards and not being complacent when it comes to compliance. It’s a timely reminder for intermediaries that there is a difference between providing best advice and recording it.”
