Mortgage advice to be regulated

A mortgage can be the most significant financial commitment of a lifetime

People looking for mortgages should get better advice and clearer product information, under proposals unveiled by the City watchdog.

We want to make sure that consumers get clear comparable information

Sarah Wilson, FSA

The Financial Services Authority (FSA) plans to regulate "mortgage advice" from mid-2004, which means companies that sell mortgages must be authorised by the authority - and comply to its standards.

The FSA believes its proposals, which follow an announcement by the Treasury in December 2001, should also curb "excessive fees".

The regulations cover mortgages taken out by individuals, certain types of remortgaging, types of lifetime mortgages or equity release schemes, but do not cover most buy-to-let loans.

Biggest financial commitment

Sarah Wilson, director of High Street Firms Division, said: "For many consumers, taking out a mortgage is one of the most significant financial commitments they will make in their lifetime.

"We want to make sure that consumers get clear comparable information on mortgages and that where they get advice they are recommended a suitable mortgage."

Under the new plans, if agreed, mortgage advisers will be required to study and pass an exam before they can give advice on complicated and risky products.

The new rules will also mean that consumers will be provided with product information early on in the sale.

This will allow them to compare and contrast different products.

In October 2002, the FSA plans to introduce tables to help people compare mortgages.

What will be regulated?

Not all products will be regulated - and the rules are quite complex.

A type of equity release scheme called "home reversion", whereby a home is sold to a company in return for a regular income until death, would not be covered under the rules.

This is because the scheme is not considered a mortgage by the watchdog.

The industry and consumers have until 11 November 2002 to respond.

The consultation paper can be found on the FSA's website (see link on right).