Paradigm Mortgage Services has called for mandatory regulated mortgage advice for all first-time buyers, arguing that the move would provide an important safeguard under the FCA’s Consumer Duty regime.
The distributor has published a new discussion paper, Mandatory Mortgage Advice for First-Time Buyers: A Proportionate Regulatory Evolution Under Consumer Duty, following recent regulatory changes, including the FCA’s decision to remove the long-standing mortgage advice interaction trigger as part of its Mortgage Rule Review.
Paradigm believes the growth of execution-only mortgage routes, combined with the removal of structural prompts towards advice, has created a significant regulatory challenge, particularly for first-time buyers.
The paper argues that first-time buyers often display characteristics associated with consumer vulnerability, including limited experience of complex financial products, lower financial resilience and a lack of familiarity with the home-buying process.
AFFORDABILITY RISKS
It also highlights findings from the FCA’s Pure Protection Market Study, which found that 58% of UK adults hold no pure protection product and that 72% of identified protection needs remain unmet.
Paradigm argues that the mortgage application process represents a key opportunity to assess protection needs, something that may be missed entirely through execution-only channels.
The paper warns that borrowers acting without advice could select unsuitable products, misunderstand affordability risks, overlook lender-specific criteria or fail to consider appropriate protection arrangements.
HIGH STAKES
Bob Hunt (main picture, inset), Chief Executive Officer of Paradigm Mortgage Services, says: “In a market where the stakes are so high, and where vulnerability can often be inherent rather than incidental, mortgage advice for first-time buyers should not be optional.
“What we are proposing is a proportionate and targeted safeguard for a consumer group making one of the biggest and longest-term financial commitments of their lives.”
Paradigm is encouraging lenders, networks, advisers and other stakeholders to support the proposal through a public pledge and industry survey.
UNIQUE CHALLENGES
The initiative has already received backing from the Association of Mortgage Intermediaries (AMI).
Stephanie Charman, Chief Executive of AMI, says: “AMI strongly supports the principle that advice is essential for first-time buyers. Purchasing a home for the first time is one of the most significant and complex financial decisions a consumer will ever make.
“First-time buyers face a unique combination of challenges including limited experience of long-term financial commitments, a knowledge gap around mortgage options and the home-buying process, and the emotional pressure of a high-stakes transaction.
“AMI believes that ensuring all first-time buyers access mortgage advice is essential to meeting the spirit and intent of Consumer Duty, closing the protection gap at a critical life stage and building the long-term financial resilience of this important consumer group. Advice is not a luxury for first-time buyers, it is a necessity.”
