Tied agents and the £5 fall-through fee are two issues set to hit the headlines following the publication of the Treasury’s consultation paper on mortgage regulation. The Treasury is awaiting responses from brokers and lenders on the paper.
Ray Boulger, senior technical manager at Charcol, said: ‘Many proposals are in line with what we expected. One surprise was the reference to section 155 of the Consumer Credit Act, which states brokers can only receive £5 if they do not complete a deal. It is necessary to have some safeguards, but the figure should be higher than £5.’
Nick Baxter, director at Mortgage Promotions, agreed: ‘It is about time this increased to a realistic figure. It has caused concern to brokers since it was introduced in the 1970s.’
In response to the £5 charge, Charles Keseru, spokesperson at the Treasury, said: ‘We think it is a sensible starting point and look forward to receiving comments.’
The consultation paper also sets out to clarify the idea of a ‘tied agent’ with point 35 which may cause concern to brokers who are independent on the mortgage side of their business, but tied on the life side.
Rob Clifford, managing director at Mortgageforce, said: ‘This rule may affect some brokers as under the new regime, they may be unable to say they are fully independent.’
Meanwhile John Malone, national mortgage manager at Scottish Amicable, said more clarification needs to be given on the term ‘arranging and advising.’
He said: ‘If you go to a specialist estate agent and they say they will arrange the mortgage but they often just give out information ‘ arranging in their eyes is equivalent to advice.’
Additional points of the consultation paper, include the section on annual percentage rates (APR) and the 40% rule. In CP98, the Financial Services Authority (FSA) accepted APRs could have some downfalls, but decided they would still be used until something better was introduced .
‘Now the FSA says it recognises APRs have failings and insists they should be included in all adverts,’ Boulger said.
On the 40% rule, which stipulates you only have the benefit of mortgage regulation if you occupy 40% of a property, Boulger said: ‘It is common for people to take in a lodger. But if you have a three-bedroom house and have two lodgers, you would occupy a third of the property and would not benefit from regulation.’
l The consultation paper can be viewed at www.hm-treasury.gov.uk.