by Mark Johnston
The financial services industry is still waiting to see the outcome of the proposed plans by the Financial Services Authority to tighten regulation within the mortgage industry. The city regulatory is now looking at forcing anyone who sells mortgages to the general public to have a professional qualification in an attempt to implement tighter controls in the industry.The Financial Services Authority is looking to make all frontline staff be it staff working as independent mortgage brokers, banks or building societies to have up to date knowledge and skills in the form of a mortgage qualification to make sure that any advice given it the right advice for the customer.
They also want to introduce a new naming mechanism to make it easier for borrowers to understand what sort of advice they are getting. The plans would replace the plethora of job titles with names such as independent advisor and restricted advisor. The idea is to help borrowers differentiate between an advisor who will look at products across the whole market to one that only looks at certain ones from certain lenders.
The plans will also force companies to disclose whether they are searching the whole mortgage market including those only offered direct from banks and building societies. The idea behind this is that the customer will then have an indication of whether those sorts of deals are available and whether they may save money by going direct to the provider.
All these plans are part of the FSA’s mortgage market review which plans to make lenders more responsible for whether a customer can afford their mortgage or not.
The controversial new rules have already sparked the industry into asking the Financial Services authority to reconsider their new mortgage regulations as they believe that the new rules will result in tens of thousands of people not being able to get a new mortgage.
The is unrest seems to be building as more concerns are raised in response to the FSA’s hard line stance on mortgage industry reform. The chairman of Redrow, Steve Morgan spoke out during the company’s annual general meeting and suggested that the reform could kill off the industry.
Mr Morgan Chariman of Housing company Redrow said: “Our message to the Government is simple: the regulators are going too far. Deliberately suppressing housing demand at the very time that the country has a chronic housing shortage is laying the foundations for the next boom/bust cycle.”
The Redrow chairman suggested that he had never seen the mortgage market in a worse state in his 30 years as a home builder. He went on to say: “. “We are not asking for irresponsible lending and I don’t think the regulator means to pull apart the housing market. But the effect of what they are proposing will be that that is exactly what will happen,”
The rules will see Banks and Building Societies introduce even tougher lending criteria to make sure borrowers can afford their home loan at the time of taking it out and in the future if for instance, the Bank of England base rate was to increase.
A CML spokesperson at the Council of Mortgage Lenders said: “We question whether all consumers want or need the level of advice that the FSA wants to put in place. There is also a cost issue involved, although it is too early to assess what that will be.”
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