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UK financial watchdog says mortgage advice can be improved
Most people in the UK get suitable advice when they take out a mortgage but there is still room for an improvement in standards, according to a review by the UK’s financial watchdog. Two studies from the Financial Conduct Authority (FCA) found that many lenders have taken significant steps to provide advice for the first time. These firms, and those that have always provided advice, should now focus on delivering consistently good outcomes for customers. They also found that while there was no evidence of systemic customer detriment, some firms were failing to take reasonable steps to obtain sufficient, relevant information about customers’ needs and circumstances before making recommendations. Although 59% of advice provided to customers was assessed as suitable, with only a small number of cases assessed as demonstrably unsuitable, the basis for 38% of recommendations was unclear. The consumer research highlighted that some customers place the greatest importance on the initial monthly payment to the detriment of other factors. This can dictate whether they think a mortgage is a ‘good deal’ or not. ‘A mortgage is a significant undertaking for anyone. It is vital that customers are able to get suitable advice and a positive experience when deciding on their options. Some firms were able to provide this, but not all,’ said Linda Woodall, acting director of supervision at the FCA. ‘Although we welcome the considerable work of those firms delivering advice for the first time, and particularly those that have proactively identified issues within their own processes, there is still scope for improvement. We’ll continue working with firms to ensure they deliver good outcomes for consumers,’ she added. Following the review, the FCA said it will continue to work with industry to address the issues identified. Individual feedback to firms visited as part of the study has already been given, together with actions required as a result of the findings. Some firms assessed had already independently identified issues with their advice processes, and were making changes to improve their service to consumers. The review also found that many lenders had made significant efforts to deliver advice for the first time by investing in systems, front line staff and operational capability. Some firms were relying on highly structured processes. This often resulted in lengthy, stilted and repetitive conversations with consumers which limited the adviser’s ability to engage effectively and properly assess needs and circumstances. By contrast, other firms delivered advice with little or no structure, resulting in inconsistent quality of advice and a higher chance of unsuitable recommendations. The best performing firms have demonstrated that it is possible to strike an appropriate balance. The review of advice and distribution forms part of the FCA’s wider programme of mortgages work. Its thematic review into responsible lending commenced in April 2015 and from autumn this year, the FCA will begin a wider assessment of barriers to competition, with a view to launching a market study in early 2016 on those aspects of the… Continue reading
Annual price growth in England and Wales slower but prices set new high
House price growth in England and Wales is at a two year low but the average price at £278,849 is a new high, according to the latest index figures. However, annual property price growth slowed to 4.1% in June, the smallest yearly rise since August 2013, says the LSL house price index. But whereas London has been leading house price growth, the reverse is now happening. London ranks only seventh in the regional breakdown with annual price growth down to 1.8%, well down from the 20.7% recorded in July 2014. Sales are also strong, up 15% in June and the firm says that buyers have come back with a vengeance after a lull in the run up to May’s general election. The data also shows that month on month property prices were up 0.3% and overall home values are on average £10,980 higher than a year ago. And overall excluding London and the South East annual price growth is 4.4%. Adrian Gill, director of Reeds Rains and Your Move estate agents, said that sales in June were above the seasonal uplift typically expected at this time of year. ‘This new buoyancy in activity levels bodes well for property market in the coming months. It’s clear the general election distorted the usual tide of the market, with many buyers waiting until afterwards to complete on their purchases,’ he explained. ‘In the first half of 2015, sales are 13% lower than the same period last year. But June’s sharp upward spike shows the start of this calibration back to firmer territory, as confidence in the political landscape solidified with a majority government,’ he added. He explained that it is a slowing of prices at the top end in London that is pulling down the overall average and the lower rungs of the ladder are still dynamic. In the cheapest London borough Barking and Dagenham house prices have risen 15% over the past year. Overall, the lowest priced boroughs across the capital have seen annual price jumps of 10.1% on average, compared to steadier 2.8% year on year rises in the most expensive London locations. ‘It is the pricier south of the country which has seen the most significant slowdown in sales with the volume of properties sold in London and the South East 15% lower than 2014 levels. But healthier activity levels in the North, Yorkshire and Wales should help to balance out some remaining regional disparities in price growth,’ said Gill. ‘It’s encouraging that we’re seeing livelier activity where prices need to get back onto their feet as there are still some pockets of Wales, the North and Yorkshire where house prices are lower than 12 months ago,’ he added. He also explained that with borrowing cheaper than ever, wages recovering, and government schemes and incentives to lean on, buyers’ purchasing power is stronger than it has been for a long while. ‘As a result of this positivity, higher… Continue reading
Recovering UK economy boosts prime rental values in the South East
Prime rental values in the Home Counties in England rose by 1.9% between April and June, driven by the recovering UK economy and an increase in rental demand from corporate tenants. Annual rental growth stands at 4% as corporate demand makes the spring and summer months the most active as families relocating for work look to move before the start of the new school year. And while corporate demand is not back to the same levels seen before the financial crisis, it has stepped up notably, according to the latest index from real estate firm Knight Frank. Between April and June, corporate tenants made up some 47% of all tenancies commenced across the Home Counties, up from 29% during the comparable period in 2014. In the area, which comprises the counties of Berkshire, Buckinghamshire, Essex, Hertfordshire, Kent, Surrey, and Sussex, quarterly rental growth for one bedroom properties was 0.4% compared to 1.5% for four bedroom homes. Corporate demand came from a range of industries in the three months to June, including the oil and gas, technology and pharmaceutical sectors, as well as from finance workers, according to Oliver Knight of the firm’s residential research team. ‘Additionally, there is anecdotal evidence to suggest that corporations are also stepping up their budgets which has translated into more competition for larger properties. This is certainly reflected in stronger rental growth being recorded in larger properties than smaller ones in the second quarter,’ he said. He also pointed out that demand for prime rental properties in the Home Counties continues to be widespread, with some 47% of tenants coming from outside of the UK between April and June, led by tenants from North America. ‘Tenants relocating from the US are often most active during the first half of the year, with many looking to complete moves ahead of the American and International school term starting in August,’ explained Knight. A breakdown of the figures show that overall 53% of tenants are from the UK, 27% from North America, 7% from both South America and Europe and 3% from both Asia Pacific and Africa. The index report also shows that the number of potential tenants, both corporate and private, registering with Knight Frank lettings agents so far this year rose by 7%, compared to the same period last year. The number of applicant viewings was 24% higher over the same time, which Knight said is an indication that activity should continue to be robust in the coming months. Continue reading
