Aifa warns that IFAs may be pushed out of the mortgage market if regulations forcing lenders to police intermediaries result in more red tape.
In its response to the FSA's mortgage regulation document, Aifa says any increase in the regulatory pressure on IFAs could turn out to be the straw that broke the camel's back.
IFAs are already subject to regulation by the FSA for their core business and by the Mortgage Code Compliance Board for mortgage business.
Aifa says that, for most IFAs, mortgage advice is only an incidental part of their business, so the FSA should keep bureaucracy to a proportionate minimum.
It is also concerned that the FSA may end up pushing IFAs out of the market because it is increasing the amount of information they must disclose, with little evidence that consumers will bother to read it.
Aifa fears that lenders will stop dealing with independent advisers which only carry out a small amount of mortgage business because it will not be cost-effective for them to ensure that the extra documentation has been passed to clients.
Aifa has also published its response to the FSA's consultative paper about the handling of mortgage endowment complaints.
It argues that although endowment complaints have shot up since the reprojection exercise, IFAs only account for 12 per cent of complaints referred to the Financial Services Ombudsman Service.
Aifa director of policy & technical services Fay Goddard says: “Regulators must take into account that IFAs are, for the most part, small businesses with limited resources at their disposal.”
Pretty Technical Partnership partner Kim North says: “I completely agree with Aifa. Increased bureaucracy and compliance costs will force IFAs to exit the mortgage market.”