There is news today that Nationwide has removed their promise to peg it’s variable rate mortgages to the bank rate.
Instead of offering customers their current follow on rate (BMR), new customers will revert to their Standard Mortgage Rate (SMR) at the end of any fixed rate mortgages taken out after 30th April.
Whilst this is an interesting insight in to the difficulties many lenders are facing, it also serves as a striking example of an industry obsessed with TLA’s (three letter acronyms ) and over complicated abbreviations.
When recommending a mortgage , be it a tracker following BoEBR, a discount from SVR or a Nationwide fixed rate that reverts to BMR or SMR, the FSA insist on both a KFI and an IDD to be supplied to the customer. Should the customer want to apply, you’ll traditionally offer them an AIP or a DIP before moving on to the FMA (after checking their LTV and making sure they understand the APR). If they’re selling a property they’ll need a HIP, and if they’re a FTB you should really be talking to them about LTA / DTA and CI – as well as ASU of course.
It strikes me that, for an industry where clarity is paramount, we can all be guilty of hiding behind technical jargon sometimes – hopefully our jargon buster can help people understand much of it, but IMO customers will be best served if move away from these TLA’s PDQ.
BMR: Nationwide’s Base Mortgage Rate: The rate existing borrowers revert to at the end of an initial deal. Guaranteed to never be more than 2% above the Bank of England Base Rate
SMR: Nationwide’s Standard Mortgage Rate: The rate borrowers who take out a fixed mortgage after the 30th April will revert to at the end of an initial deal. No rate guarantee in place.
BoEBR: The Bank of England Base Rate
SVR: Standard Variable Rate: the rate set by the lender that their variable rate mortgages will be set against (excluding trackers). Also often the revert to rate at the end of a deal
FSA: The Financial Services Authority: the body responsible for regulating the UK mortgage industry
KFI: Key Features Illustration: A document showing the details of a mortgage product in a defined format, which must be given to a client before they apply.
IDD: Initial Disclosure Document: A document showing the details of the introducer / broker in a defined format, which must be given to a client before they apply.
AIP: Application in principle
DIP: Decision in principle
FMA Full Mortgage App
LTV Loan to Value
APR Annual Percentage Rate
HIP Home Information Pack: information provided by a property seller, more info on HIPS
FTB First Time Buyer
LTA Level Term Assurance: More info on Term Assurance and Life Cover
DTA Decreasing Term Assurance More info on Term Assurance and Life Cover
CI Critical Illness More info on Term Assurance and Life Cover
ASU Accident Sickness and Unemployment cover
OMG Oh my gosh
TLA Three Letter acronym
IMO In my opinion
PDQ Pretty Darn Quickly