Unsecured loans rival mortgages
Boulger said mortgage brokers should know about unsecured loans and be prepared to turn away clients who would be better off taking one out than a mortgage.
For consumers looking for between £7,500-£15,000 Sainsburys, Marks & Spencer and Zopa can provide loans at 3.5% per annum typically up to five years, while due to protections built into the Consumer Credit Act the maximum early repayment charge is one month’s interest.
Brokers would be throwing away commission, but Boulger reckoned they have a responsibility to do right by the client and get clued up on what’s available.
From March 21 2016 brokers will have to mention second charges alongside the option of a standard remortgage.
Boulger said: “If you are trying to give you clients a good service you need to have enough knowledge of what else is available for when the mortgage may not be the best solution.
“If you understand what the options are, you’ve identified what the client wants and you’ve seen that an unsecured is the best solution there’s no reason why you shouldn’t tell them – it often pays dividends in the long-run.”
Boulger added: “It is surprising you can get an unsecured loan cheaper than a 95% loan-to-value mortgage and that demonstrates a failure in the market, although it’s likely down to regulatory requirements.”