The Treasury has released the final outcome of its consultation on mortgage advice, with very little change from the original document.
The paper has been greeted with equanimity by lenders and brokers alike as the Treasury has decided to change very little, despite a huge response from the industry.
The most significant change appears to be the treatment of individuals who introduce clients to mortgage advisers. These ‘introducers’ will not now require authorisation from the FSA if they introduce clients to an authorised firm, regardless of whether that firm is independent or otherwise.
This change is thought to be good news for the estate agents, and house builders who introduce clients to mortgage advisers.
James Mayne, strategic development manager at Britannic Money, said: ‘The Treasury has backtracked somewhat. A huge number of people would have been authorised that did not need to be. This way the consumer is still protected as they are getting regulated advice somewhere down the line.’
One of the most contentious issues was whether packager firms needed to be authorised or not. Despite a high level of response from the industry that the drafting was unclear as to which packagers would need authorisation and which would not, the Treasury’s response is still not clear. It appears that mortgage clubs and mortgage packaging companies would not be caught under arranging but broker packagers and correspondent lenders will fall into the regulatory net.
Patrick Bunton, head of operations and compliance at London & Country Mortgages, said: ‘Some packagers and mortgage clubs will be relieved by the Treasury’s paper. While it is still not a particularly clear definition, packagers should escape regulation if they clearly do not play a part in the advice process.’
Buy to let has remained outside the regulatory scope of the FSA, which has caused disagreements within the market. Sean Hornsby, sales and marketing director at Mortgage 2000, said: ‘Despite buy to let being a mortgage, it is not going to be regulated. The Treasury has missed the point that borrowers are just as likely to get bad mortgage advice on a buy-to-let property as they are on a residential one.’
However, John Heron, managing director of Paragon Mortgages, said that the Treasury had got this section of the process right. ‘This was not a surprise. Whichever way you analyse it, buy to let is a commercial activity and if the objective is to protect people’s homes then it makes no sense to regulate this sector of the market.’
Other topics not addressed in the document include polarisation, which is to be issue for the FSA to consider when the results of CP121 are published later on this year. Concern has also been voiced over appointed representatives, which again has been left up to the discretion of the FSA.