I don't get directly involved in mortgage advice
- a decision I made several years ago, and have yet to regret it. In fact, I'm very happy to delegate that kind of work to specialists who know the market well, have all the links in place and can very efficiently direct clients to the most appropriate sources of mortgage funding.
But, on reviewing a summary of mortgage data from 2013, I did actually come close to reconsidering that kind of strategic disengagement.
For first-time buyers, in 2013, the average income multiple was 3.36 times salary and borrowers would have spent 19.3% of their income on capital-and-interest repayments. During the same year, the maximum multiples were 4.5 times single or joint income. This does represent a significant increase since the Cretaceous Period when I was involved in this sector, and it occurred to me that an awful lot hinges on interest rates remaining permanently low.
Now, in the MMR
, the FCA has loaded responsibility onto Lenders to police the whole affordability thing, and I'll be interested to learn how this develops in practice. I have wondered about the wisdom of reducing the role of the intermediary in that respect, as I would have thought that (in the intermediary marketplace) the more direct contractual responsibility of adviser to client would have lent considerable moral and professional weight to nailing the affordability angle, long before the client was introduced to a Lender. It is odd sometimes how Regulation appears to unravel the very lines of demarcation which one would have thought made the most sense.
So, I still
don't advise on mortgages per se. But I do have a vested interest in the financial viability of my clients. I do want them to make realistic provisions for retirement, for their children's future educational needs. I want them to have sufficient (liquid) financial reserves to weather the storms of sickness, disability, employment issues. I don't want them to have to delay commencing retirement provision, because they're in the hamster-wheel of excessive indebtedness - and then resort to taking silly risks with their investment strategy, because they feel that's the only option. And, of course, all this becomes rather more challenging once they've gone for the most expensive house they can possibly manage, and loaded themselves up with so much debt that their residual income has to be stretched very thinly to cover all the other overheads.
In short, it feels as if I do have a responsibility in ensuring that my clients make good, financially sound decisions in this area. Merely referring them on to a mortgage broker, and fondly waving goodbye doesn't entirely seem good enough, does it?
Two relevant updates
Bluecoat Software have substantially improved the FactFinding technology at the core of ValidPath's Clarity practice-management system - to support financial planners with effective budgeting and planning tools.
ValidPath have upgraded our HouseBuyers Guide (template) which can be downloaded from our site (login required).