A buyer asks a salesperson which bank's home loan to take. The salesperson explains what a finance condition is, lists the published cost of a bank's fixed rate, and suggests the buyer speak to a mortgage adviser. Under Schedule 5 of the Financial Markets Conduct Act 2013, has the salesperson given financial advice?
Correct Answer
A) No; factual information and suggesting advice are not financial advice.
Financial advice includes recommending or giving an opinion about acquiring a financial advice product, which includes a consumer credit contract such as a home loan (FMCA s 431C, with “financial advice product” defined in s 6(1) to include a consumer credit contract). Schedule 5 clause 7 says a person does not give financial advice merely by providing factual information or recommending that the person obtain financial advice. Explaining terms, stating published rates and referring on stay within those exclusions.
Why This Is the Correct Answer
Each thing the salesperson did falls within the Schedule 5 clause 7 exclusions.
Why the Other Options Are Wrong
Option B: Yes; any discussion of mortgage rates with a buyer is financial advice.
Schedule 5 clause 7 says providing factual information, such as costs or terms of a product, is not financial advice.
Option C: Yes; recommending that the buyer see a mortgage adviser is itself regulated advice.
Clause 7(d) says recommending that a person obtain financial advice is not financial advice.
Option D: No, but only because real estate salespersons may give any mortgage advice they like.
The answer turns on what was actually said; recommending a particular loan product would be financial advice.
Background Knowledge for Finance
Source: https://www.legislation.govt.nz/act/public/2013/0069/latest/whole.html
Exam Tip for Finance
Facts and referrals are safe; telling a buyer which loan to take is financial advice.
Common Mistakes to Avoid on Finance Questions
- •Thinking any mention of mortgages is regulated advice, or that nothing a salesperson says could be.
More Finance Questions
What is the current standard LVR (Loan-to-Value Ratio) restriction for owner-occupier residential property purchases in New Zealand?
What is a key advantage of a revolving credit mortgage facility?
When assessing a mortgage application, which factor is typically given the highest priority by New Zealand lenders?
James has been contributing to KiwiSaver for 4 years and wants to withdraw funds for his first home. His KiwiSaver balance is $45,000, but $15,000 consists of government contributions and employer matching. What is the maximum he can withdraw for his house deposit?
What is the main advantage of a table mortgage compared to an interest-only mortgage?
- → What is the maximum amount a first home buyer can withdraw from their KiwiSaver account for a house deposit?
- → What does LVR stand for in New Zealand mortgage lending?
- → What is the key difference between a table mortgage and an interest-only mortgage in terms of monthly payments?
- → A bank checks how much of a borrower's gross income would go on debt repayments. The borrower earns $80,000 a year, already pays $800 a month on other debts, and the new mortgage would cost $2,200 a month. What share of gross income would the repayments take?
- → Sarah earns $80,000 annually and wants to borrow $400,000. What is her debt-to-income ratio?
- → A property is valued at $600,000 and the buyer has a $100,000 deposit. What LVR would this loan represent?
- → Which of the following is NOT typically considered by banks when assessing lending criteria?
- → How long must a KiwiSaver member have been contributing before they can withdraw funds for their first home?
- → Which type of mortgage allows borrowers to make additional payments that can be re-borrowed later?
- → A couple with a combined income of $120,000 wants to buy their first home for $650,000. They have a 15% deposit. What is their LVR?
People Also Study
Property Law & Legislation
56 questions
Agency Practice
89 questions
Sale & Purchase Process
63 questions
Professional Conduct & Ethics
46 questions
Related Study Resources
Previous Question
A borrower received the lender's initial disclosure for a consumer credit contract on Monday and now regrets the loan. Under s 27 of the Credit Contracts and Consumer Finance Act 2003, what right does the borrower have?
Next Question
A buyer asks how a Kāinga Ora First Home Loan works. Which description is accurate?