The Council of Mortgage Lenders (CML) says it wants to simplify the current patchwork of regulation into a single framework under the auspices of the new Financial Services Act.

House purchase is most people's biggest single purchase

Previously, mortgage lenders had backed a voluntary code of conduct to regulate mortgage lending.

But such a position increasingly became untenable as clamour has grown for regulation of what amounts to the largest financial decision by most households.

The CML now says that statutory regulation would provide more consumer confidence, with a "one stop shop" for regulatory issues.

It would also benefit the industry by making the same rules compulsory for all lenders.

"It is now time for regulation to move on, and for the important principles which have been established voluntarily to move onto a statutory footing ... the CML urges the government to take this golden opportunity to simplify and improve mortgage regulation," said CML Director General Michael Coogan.

At present mortgages are subject to regulation under three separate regimes - the Consumer Credit Act, the voluntary Mortgage Code, and the Non-status Lending Guidelines.

The change of heart by the industry makes it certain that the Financial Services Bill, which is currently going through Parliament, will incorporate the new approach.

No agreement on CATs

But there seems to be less agreement within the industry about proposals for a set of standards, called CATmarks, which would be applied to mortgages which met government terms of fairness.

Such "model mortgages" have been supported by lenders such as the Abbey National, but most mortgage lenders appear to prefer a requirement for full disclosure of "key features" such as interest rates and redemption charges.

The Abbey argues that certain features, such as compulsory property insurance with a tied-in company, are undesirable and should be banned.

"We feel that some of the problems are best tackled at source. We would feel very unhappy with a regime that continues with some of the features we have at present," said Andrew Pople of Abbey National.

But the Halifax, the UK's largest lender, argues that CATmarked mortgages would be impractical, and that the "key-features" proposal would preserve consumer choice.