Against a backdrop of the credit crunch and tumbling house prices, a harsh light is being shone on goings-on in the world of mortgage advice. Much of it relates back to when the housing market was going gangbusters, and some greedy and unscrupulous mortgage brokers lied and committed fraud in order either to secure loans for themselves or to earn bumper fees.
If you want proof, just look at the Financial Services Authority website, which details the fines and banning orders now being thrown round like confetti. As one insider told me last week, there are plenty more to come as the regulator gets to grips with a market with more than a hint of the Wild West about it.
Disturbingly, investigators now suspect the involvement of organised crime. High concentrations of dodgy brokers have been found in the same localities – normally in London and the South-east.
The good news is that the vast majority of us will not come into contact with these crooks. However, there are plenty of other sharks swimming in the mortgage waters. The consumer group Which?, in one of its "mystery shopping" exercises, reported last week that of 50 brokers it had approached – working for banks, estate agents and themselves – 41 failed to supply key information on the mortgages they were offering. Many seemed focused on flogging, largely discredited, payment protection insurance (PPI).
I have my own experience of how some of these brokers work. A couple of years ago, when buying my home, I made enquiries at a large chain of estate agents. Within hours I was cold-called by a "mortgage broker" – I'll call him Wideboy – from a firm that had a relationship with the agent. Wideboy tried his best to persuade me to take out an exclusive mortgage deal. I was told breathlessly that I could elevate my ambitions from the hovels I was viewing, because he could "swing it" for me to get a loan at a very high multiple of my income.
All I had to do was part with a couple of grand in fees, which would be rolled up into the mortgage so I wouldn't feel the pain there and then. I might even be allowed to borrow more cash if I signed up to – you guessed it – PPI.
I didn't take Wideboy up on his offer, as I can't see how anyone can enjoy home ownership if it comes with a crushingly expensive mortgage. As for PPI, it is a colossal waste of money.
However, just ask yourself how many Wideboys were out there during the property boom and how many people were tempted by their sales patter and are now counting the cost.
Adam Smith's airlines
EasyJet says it will be cutting back on its flight numbers during the winter in response to the rising cost of fuel. Does this signal the end of cheap air travel? Not a bit of it: a quick search of the budget websites reveals fares to European destinations and beyond for just a few quid.
Of course, the budget airlines always try to squeeze cash out of you. I recently booked with one and was told I'd be charged if I wan-ted to have a particular seat (thereby avoiding screaming babies), to check in baggage or to board at any time except the last second. I decided not to pay extra, and travelled so cheaply that I didn't mind having to squeeze my belongings into a handkerchief-sized attaché case. As for the baby blues, I recommend earplugs.
Budget airlines are the free market writ large, Adam Smith's "invisible hand". They have allowed more Britons to see more places cheaply than ever before. Prices may go up a bit over the next few months and years, and some less profitable routes and airlines close, but the business model is now in our collective consciousness, as is the personal freedom it brings. The environmental cost, though, is a whole different story.Reuse content