Financial Services Authority (FSA)
Loan Insurance
FSA has found out that some loan companies are selling expensive and often worthless loan insurance.
I believe it’s about time there was a crack down on loan companies charging for worthless loan insurance, known as Payment Protection Insurance. The policies are supposed to cover loan repayments if borrowers fall ill or lose their jobs. But many are useless and don’t cover you.
There are far too many get out clauses, meaning claimants aren’t eligible for their cash.
Anyone with existing medical problems could have their claims turned down. And unemployment cover is useless if you are self-employed because you can’t claim for being out of work.
Lenders are keen to sell the cover because of the fat commissions up to £5 billion a year. The FSA has been punishing lenders who push cover on those who don’t need it.
Please remember loan cover is optional – whatever a lender says. You may already have adequate insurance through the policies. If you do need it, make sure you know what you are covered for.
Don’t use your lender for insurance – Try British insurance.com; they sell policies for a tenth of what banks charge.
Mortgage Alert
When we want to buy a house we see a mortgage adviser for information on the cheapest home loan available. Some of us about two thirds are at risk from wrong advice given by
Mortgage advisers.
The Financial Services Authority (FSA) found that almost 70% of mortgage brokers and advisers do not always give suitable information for those of us who fork out fees that can be as high as £200 an hour every time we move house or mortgage.
Even more worrying in the current climate of high interest rates, rising house prices and bigger loans is that a lot of the poor advice relates to calculating how much we can afford. Some advisers are simply getting it wrong.
According to the FSA, the chance of receiving bad advice is higher if you visit a smaller broker or lender.
About 80% of companies make up the advice market are less likely to have the proper systems in place to comply with the regulator’s standards. But big companies are not beyond approach even the big companies cannot provide the best advice in 100% of cases.
So whether you prefer a small broker or lender or a big brand name is usually a question of personal choice.
Andrew Montlake, of cobalt capital, the mortgage broker, says “there are advantages to using a small broker. Larger brokers can have more of a sales mentality that can leave you feeling like just another application form. But large companies became large for a reason and will generally have more robust compliance requirements and better training for their staff.” The FSA regulator refused to name culprits until it has carried out further investigations.
To avoid becoming a victim in the meantime, do not be afraid to grill your adviser. Do your homework. Personal recommendations from family and friends and a good reputation are worth a lot, assess the competition.
For a list of independent financial advisers, visit www.unbiased.co.uk. Check out two or three and ask for proof of three years experience and qualifications. Which!, the consumer group, advises borrowers to ask for everything in writing, including the costs and mortgage recommendations, to avoid disputes later. Mr. Montlake says; “A good broker will disclose immediately any information you ask for and will not hurry you or make you feel stupid for asking a question, however small. Be wary of those brokers who want your money up front before you have received suitable advice that you are happy with. Check that the adviser is regulated, at www.fsa.gov.uk/register, but remember that the FSA does not regulate buy-to-let mortgages. You also have an obligation to help the adviser to help you. Make sure that all the information you provide, especially about income and expenditure is accurate and up to date. Think about what kind of loan you want, and why, before you visit. For instance, whether you want to under or overpay, or prefer fixed or variable costs. Also go with a rough idea of how much you want to spend and how much you can afford. Most large lenders and brokers have calculators on their websites which allow you to check both. Those who prefer to go it alone can pursue a number of options. A walk down the high street is rarely enough to get you the best deal. Instead, use the internet, starting with two or three price comparison websites, such as www.moneysupermarket.com or www.mform.co.uk to see the best options for you. These analyse the “true cost” of a mortgage deal based on your personal information and do not merely compare rates. The FSA’s own website, at www.mortgageslaidbare.info, gives basic information on the different types of mortgage. There are also a number of websites that act as a halfway house between a broker and a comparison service. For instance, www.moneypilot.co.uk allows you to compare deals online and then complete the application process by phone with an adviser.
Rebecca O’ Connor.
Credit- Repair Mortgage Range from Norwich & Peterborough Building Society
What is it?
Two year fixed tracker deals for homebuyers with low credit ratings because of past debt problems. A two year tracker pegged at 0.49% points above the bank of England base rate, giving a current pay rate of 5.49%, is on offer to borrowers who have a maximum of £2000 worth of county court judgments in the past two years, one mortgage arrears in the past year and none in the past six months. Borrowers with more serious or more recent debt, such as independent voluntary agreements (IVAs) or discharged bankruptcies, will be offered other rates depending on their circumstances.
What are the plus points?
The tracker rate is currently a best buy for “light adverse” borrowers. Norwich & Peterborough will use an affordability calculator to assess how much the borrower is able to repay, instead of traditional income multiples. Rob Clifford, of Mortgageforce, the broker, says: “This more fairly and accurately establishes the ability to repay.”
What are the drawbacks?
Borrowers with more serious problems could find deals about two percentage points cheaper elsewhere.
The verdict
Thumbs up for borrowers with only minor credit problems. However, the rates may be too high for those who have more problematic debt histories.
Rebecca O’Connor
