With market tumult, my client profile has changed, with the traditional “downsizer” purpose reducing but the desperate re-bridge increasing.
This can be for a multitude of reasons, such as an over-estimated gross development value (GDV) project, decreasing end values or a build cost that has spiralled. Most cases appear linked to poor advice or no advice at all. After all, if it’s unregulated, who cares, right? Wrong.
What strikes me is the willingness of clients to have offered their home as security for business purposes, and the poor advice that led to it from unregulated brokers or clients who approached lenders directly.
I ask, is it time for business-purpose second charges to be given with advice via Financial Conduct Authority (FCA) brokers only?
The use of someone’s home for any purpose should be given careful consideration, taking into account a client’s entire financial situation, rather than the “we just ask 18 questions and your first month’s interest is free”, which treats homeowner borrowing as a low-risk gimmick, similar to a lower-risk credit card or loan, and packaging as ‘business only’ without advice, which can place clients at serious risk of financial harm – something Consumer Duty was introduced to prevent.
Why should FCA-regulated brokerages be held to a different service and compliance standard than unregulated brokerages, yet we use the same lenders and work in the same spaces?
Our industry is composed of outstanding advisers, lenders and packagers who, on the whole, work for the clients’ best interest. However, a retail client, a homeowner, a new investor, an inexperienced developer or self-employed trader deserve protection when using their family home as collateral, as when things go wrong, they really go wrong. The client has little recourse, as it’s unregulated.
Lenders have a role to play. There are over 300 bridging lenders in the UK, which is more than the number of approved main-market mortgage lenders. Why does the minnow of UK lending (by comparison to main mortgages) have so much unregulated interest? I’ll let the reader ponder that point.
Any product we offer as advisers or industry professionals must have the client’s best interest central to what we do. A world in which some brokers or lenders are regulatory-bound to act properly (with criminal consequences for not doing so), but others are not, is not one that builds trust or centralises the client.
With a changing market and squeezed pipelines, is it time everyone was held to account, equally?
