Their thinking may well be translated into law as a draft bill to go before Parliament is likely to take into account their recommendations.

Lord Burns: Chaired the committee of MPs looking at the FSA's powers

The MPs argue that the mortgage industry, one of the most important personal finance aspects of many people's lives, is poorly policed.

In essence it is self-regulatory, being governed by the banks' and building societies' voluntary code.

The solution put forward by the MPs means beefing up the Financial Services Authority (FSA) to include home loans as well as the financial markets within its regulatory sphere.

Pressure cooker

The MPs were reacting to pressure from several areas over the policing of the mortgage industry. These included:

• Consumer groups wanting stricter regulation of the home loans industry.
• The Office of Fair Trading estimates there are more complaints to trading standards officers and Citizens' Advice Bureaux about mortgages than about second hand cars
• Many MPs have 'horror stories' about vulnerable constituents fleeced by unscrupulous lenders

Hands off

Perhaps predictably, the mortgage industry has argued that it be left alone.

It says endowment policies, a particular source of concern, are already sufficiently regulated as investment products.

Even the FSA's chairman Howard Davies has been cautious about extending his organisation's powers.

But the committee of MPs and peers said in a report: "We recommend that a decision in principle be taken now to bring mortgage advice within the scope of the FSA."

"We agree that long-term healthcare insurance should be included," it added.

The Financial Services and Markets Bill, drafted last July, gave the FSA statutory authority to police the markets but the financial community has expressed concern for the power it would wield if the bill went through in its current form.

The committee also suggested that, in the longer-term, the FSA should split the role of chairman and chief excecutive to improve accountability.

The committee was set up by the government to specifically look at the new FSA bill.

It was chaired by the former permanent secretary to the Treasury, Lord Burns.

It also suggested a non-executive chairman should be appointed to oversee the actions of the chief executive and chairman. The bill should become law next year.

But it supported the principle of having one regulator for all the financial markets.