The benefit of a second opinion
Why getting advice on your mortgage might be the right medicine
Based upon the new rules coming out of the Financial Conduct Authority, it is going to get a lot tougher to get a mortgage. Money Mail Editor James Coney’s critique of the new system brought to life the hoops you have to jump through to buy a house. A 20 minute phone call, a 90 minute interview, a second questionnaire. A catalogue of every incoming and outgoing expense. The Telegraph View has said this paternalism flies in the face of George Osborne’s pensions reforms and that people should be able to make their own mistakes, no matter what they are. Meanwhile the Independent suggests the only way to pass the test is to act as if you are already paying your future mortgage to show the bank you can afford it. In ThisisMoney, mortgage adviser Ray Boulger says ‘if the new rules were applied to car insurance, nobody under the age of 25 would be able to drive a car because they would be deemed too risky.’
So that sounds too extreme, but aren’t these ‘stress tests’ necessary for all life decisions? Under the mortgage rules, most people will have to obtain help from an adviser before taking out a mortgage. But doesn’t it make sense to seek a second – and expert opinion – on a decision that could change your life forever? The so-called mortgage prisoners would probably answer in the affirmative.
Money is an emotional matter – as emotional as sex, politics or religion – the three topics you should never discuss at a dinner party. Life decisions are almost always entwined with money matters – getting married, having children, buying a house, saving for your children’s university fees – all have a financial consequence. This is particularly true when it comes to saving for retirement. People are blinded by the amount of choice and the plethora of decisions they face, from employer sponsored pensions to ISAs to personal pensions to savings accounts, all of which blur into one. It’s like looking at a restaurant menu that has too many options. You feel overwhelmed, confused, indecisive - and those feelings often lead to the worst decisions. People struggle to contemplate their long-term future, can’t imagine getting old and certainly can’t wrap their heads around just how long their retirement will actually be.
Aren’t we right to put these emotions aside and get experts to look at our financial matters objectively? The urge to keep up with the Jones caused the mortgage crisis. This instinct must be allayed – and who better than someone who is completely removed from your personal – and inevitably emotional – situations?