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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
UK residential property prices showing steady growth, latest index shows
UK house prices increased by 3.3% in the second quarter of 2015 compared to the previous quarter taking the average price to £200,280, according to the latest property price index. It means that the quarterly rate of change has picked up following two successive falls and prices in the three months to June were 9.6% higher than in the same three months a year earlier, the data from the Halifax shows. This was higher than May’s 8.6% and the highest quarterly rise since September 2014 when it was 9.6%, and on a monthly basis prices increased 1.7% between May and June, the fourth consecutive monthly rise. The steady increase in prices comes as home sales remain steady. Data from HMRC shows UK home sales increased by 1% between April and May and sales in the three months from March to May were 0.5% higher than in the preceding three months, but were 4.2% lower than in the same period last year. According to Martin Ellis, Halifax housing economist, supply remains very tight with the stock of homes available for sale currently at record low levels. ‘This shortage has been a key factor maintaining house price growth at a robust pace so far in 2015,’ he explained. ‘Economic growth, higher employment, increasing real earnings growth and very low mortgage rates are all supporting housing demand with signs of a recent modest pick-up in demand,’ he added. Jonathan Samuels, chief executive officer of Dragonfly Property Finance, pointed out that there are a lot of mixed signals in the property market at the moment as the latest index from the Nationwide shows prices falling slightly. He also pointed out that while prices in London have slowed, house prices per square metre have risen by 45% since 2010, highlighting the extent of the growth in the capital in recent years. ‘With economic growth stronger than expected during the first quarter, a buoyant jobs market and people generally better off, you would expect the market to continue to improve throughout the rest of 2015, if at a more moderate rate compared to recent years,’ he said. There is also a potential effect from the current Euro crisis and how what happens in Greece could affect the UK property market. ‘We could see a flight away from equities into bricks and mortar, but at the same time if Europe as a whole is adversely affected then the UK economy will almost certainly suffer, too,’ he added. Thomas van Straubenzee of prime London prime property agency VanHan, is expecting to see an influx of enquiries from wealthy Europeans looking to move their assets off the Continent and into London as they seek to avoid the effects of the euro crisis. ‘We have seen interest from the Middle East and India pick up again, which is not surprising as we had noticed that these buyers were particularly affronted by the idea of a mansion tax. We do not see London… Continue reading
UK prices down 0.2% in June, market sees smallest annual growth since 2013
UK house prices fell by 0.2% in June which meant that annual house price growth moderated to 3.3% from 4.6% in May, according to the latest index report. This takes the average price of a home to £194,258, according to the monthly index from lender Nationwide. The data also shows that in the second quarter prices increased by 1% and are up 4.1% compared to the same quarter in 2014. Eleven of the thirteen UK regions covered in the index saw a slowdown in the annual rate of growth in the second quarter of the year and it is the smallest annual rate of increase for two years. However, most parts of the country continued to see annual house price gains apart from Wales and Scotland which recorded small declines. The North remained static while Northern Ireland and London have the highest annual growth. Indeed, Northern Ireland overtook London to become the strongest performing region, with average prices up 8% year on year but prices remain around 45% below their 2007 peak. London saw a further softening in annual price growth to 7.3%, compared with 12.7% in the first quarter of the year. The Outer Metropolitan area followed closely behind, with annual price growth of 6.8%. The North was the weakest performing English region, with prices essentially unchanged compared with the same period a year ago. Wales saw a 0.8% year on year fall in average prices, similar to the previous quarter while Scotland was weakest performing region with a 1% fall in prices. ‘This maintains the gradual downward trend that has been in evidence since the middle of 2014,’ said Robert Gardner, Nationwide's chief economist, but he added that house price growth continues to outpace earnings. He also pointed out that the slowdown in house price growth is not confined to, nor does it appear to be driven primarily by, developments in London. In quarter on quarter terms, London has continued to see price growth at or above the rate in the UK overall over the past three quarters, while the annual rate of price growth in the capital remains the second highest in the country. He believes that given the gap between population growth and rates of house building, housing stock is likely to be used increasingly intensively until building activity catches up. ‘There are signs that this has been occurring, with the number of vacant properties trending down since 2008, though council tax changes in 2013 impacted reporting and probably overstate the decline in the last two years,’ Gardner explained. He added that the strong relationship between supply constraints and vacancy rates is clearly visible at the regional level. ‘As you might expect, regions where affordability is more stretched see far fewer vacancies. For example, in London, the UK region where affordability is most stretched, only 1.7% of the housing stock was vacant in 2014, around half the 3.5% rate prevailing in the North of England,’ said Gardner. ‘Given… Continue reading
