Commercial arrangements between estate agents and mortgage brokers could come under the regulatory spotlight after the City watchdog announced a study into “conflicts of interest” and “misaligned incentives” in the mortgage market.
The Financial Conduct Authority is seeking responses to a market study to understand whether consumers are empowered to choose mortgage products and services on an informed basis.
The market study will explore two questions:
• At each stage of the consumer journey, do the available tools (including advice) help mortgage consumers make effective decisions?
• Do commercial arrangements between lenders, brokers and other players lead to conflicts of interest or misaligned incentives to the detriment of consumers?
It is the second question that will be of more interest to estate agents.
It follows feedback to a Call for Input launched by the FCA on the mortgage sector in August, which said: “Many respondents were critical of relationships between brokers and estate agents. Criticism was directed in particular at situations where a consumer may be under the impression that consulting a certain mortgage broker is necessary in order to view, or submit an offer on, a property.”
The document highlights guidance from the National Trading Standards Estate Agency Team at Powys County Council which says estate agents should not pressure potential buyers to use associated services such as an in-house mortgage broker.
The FCA aims to publish an interim report in summer 2017, setting out analysis and preliminary conclusions. Interested parties will then have time to respond before a final report is issued in early 2018.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “As a mortgage is likely to be the biggest financial commitment most people make in their lifetime, we’re keen to ensure that competition in the mortgage sector is healthy and working to the benefit of consumers.”
If you want to give your views you can email the FCA at MortgagesMarketStudy@fca.org.uk or write to: Mortgages Market Study, Strategy & Competition Division, Financial Conduct Authority, 25 The North Colonnade, London E14 5HS.
Comments (11)
Well the proof of deposit is but just an aip alone is not.
If the aip was done without visible evidence of earnings then it is not worth the paper it is written on. also the lender will not check construction of the property, concrete , ex local above a chip shop etc. and lenders change the lending policy fairly regularly to balance their lending portfolio (risk) so what they said they would lend 2 months ago when the client started looking wont carry any weight today.
As I recall, The Estate agents act and the new order and regulation state that “An agent must make all reasonable efforts to ascertain the purchasing capacity of any potential buyer”
As I recall a firm called general accident property services came up before the law as a vendor wasted hundreds of pounds in legal and survey costs as a result of an assurance that the buyer told them all was good without finding out.
As professional do we not have to make sure that our seller is protected from Mr buyer who has not got a clue about MMR.
Or do we really want to become purple bricks and just let any old buyer come along and then hope!
Generally the only members of the public to complain are the ones who have to hide something
Professional is how we act not what we say or how posh out brochures are.
Agreed, we have to check out a buyer as thoroughly as possible…but that doesn’t mean that we can insist he uses our broker and our mortgage service. If he has gone to his own bank, got a decision in principle, and has evidence of his deposit…all of which he gives freely…isn’t that as much due diligence as you can be expected to do?
Crikey ! How long does the FCA need to discover whether there might be a conflict of interest ? It’s hardly rocket science. “Hey! Consumer, buy my client’s house (for whom I act and who’ll pay my fee) and go to this broker/service provider who will also pay me”.
If agents genuinely wish to be treated as professionals, we should be seen to be acting in the best interests of our clients at all times. If 2 buyers present themselves, one cash, one taking a mortgage that triggers additional income, we independents know the path that many corporate agents will be tempted to follow. Conflicts of interest will arise whenever an agent seeks to earn an additional fee from a buyer, be it from financial, legal, removal, and insurance referrals, whatever small print declarations might seek to mitigate.
As an Independent who occasionally interviews job applicants seeking to escape the corporate agency world, I am constantly amazed at the tales of mortgage referral targets they have had to hit and how their performance as sales negotiators is largely judged on that basis. The sad consequence is that many who might otherwise pursue a property career, with patently obvious people skills, are driven from it by the demands made on them that bear little relation to their career aspirations,
If effective action on such activity comes from this report, It shall be long, long overdue.
Agreed. Same as you…this has been going on for years…..better late than never I suppose….as long as they do actually do something and not just consult and talk about it!
When FS was self regulated by LAUTRO who did proactive policing in the 1990’s the issue was a blip compared todays regime of deregulation by Blair & cronies. They stopped policing (as has everything else he initiated!!!!!), took their eye of the ball … actually they weren’t looking at all, and some took advantage just like lettings fee’s and the game is up. I blame the regulators for not regulating over the last couple of decades, allowing a situation to multiply that is the root cause of todays problem. Too many customers were directed to MA preferred choice, some being good but many ugly.
“a consumer may be under the impression that consulting a certain mortgage broker is necessary in order to view, or submit an offer on, a property.”
In our neck of the woods this has been going on for years by the big corporate operations. I am sure we all know of situations where it has been insinuated a buyer will not get a particulate property unless he uses the agent’s own mortgage services. I was under the impression these agents allegedly might be trained and directed by head office to do it….. in order to maximise financial services income streams. Equally I am sure the powers that be have known it has been going on for years. If not, why not?
Perhaps the ‘portal juggle’ battle by our esteemed agents and associates has started to bring other customer ‘wrongdoings’ under the spotlight.
‘Wrongdoings’ to customers is what I meant.
” estate agents should not pressure potential buyers to use associated services such as an in-house mortgage broker.”
No of course they should not. But they do. Frequently.
Some corporates for years have been using the mortgage advisor as the only option to submit an offer from the buyer. One agent several years ago was exposed by a watchdog programme for gross malpractice on this very subject and yet years later they are still doing it and the business was never shut down for the fraud was on a grand scale.
Corporates have never been independent mortgage brokers when they have a cartel arrangement with lenders kick backs and staff told to only use particular lenders on commission and targets. Some small agents are just as bad. I remember one particular group of big agents from all over the UK siting around a table and setting up a cartel with commission/kick back rigging called AMPS? Who hasn’t seen a large group get a bigger commission than the small man and how come they always get the probates and repossessions.
This is a long over due ….. time bomb.
Yet another stick with a nail in it, over the head for estate agents who are clearly not flavour of the year again. The simple fact remains that once a government has the courage to regulate the business as a whole and take out all the rogue wannabe agents that set up over night and then disappear 2 year down the line they would see the majority are professional in everything they do.