The Treasury's announcement that mortgages are to be regulated is great news for the industry as well as the consumer. Charcol and other established IFAs and mortgage advisers which already practise strong compliance processes and which believe in the value that advice adds will warmly embrace the move.
Those mortgage advisers cutting corners are arguably one of the only groups which may be adversely affected. But in an industry where self-regulation has been the norm, they will only have themselves to blame when the hefty compliance bill lands on the desk.
However, the positive responses have already been superseded by the serious analysis of how the industry can most efficiently and appropriately move towards the proposed streamlined regulatory environment. There remain a number of questions that will need to be answered during and following the consultation process.
But if the recent announcement proves anything, it is that the FSA and the Treasury do take note. If it were not for the robust responses of the Council of Mortgage Lenders, lenders, brokers and others to CP98, it is arguable whether the Government would ever have rethought its stance on the inclusion of mortgage advice in statutory regulation.
Perhaps the most pressing area of concern is the future of the Mortgage Code Compliance Board requirements for executionand information-only customer service levels. While the new proposals will probably prove more cost-effective for lenders than those contained in CP98, how this kind of business will be affected is clearly an area of concern for lenders who operate in this sector.
The other area that is conspicuous by its absence from the Treasury announcement is the buy to let market. As more and more borrowers are looking towards the buy to let market as an alternative form of investment and even a retirement planning option, more clarification on this issue would be welcomed.
Regulating advice will bring about enormous benefits and, as the Treasury economic secretary Ruth Kelly quite rightly points out, the borrowers will be the main beneficiaries.
Given that the intermediary market is likely to arrange around £70bn of lending this year, the move will introduce greater clarity and protection for the consumer in what is currently a very complex regulatory environment. Having the same regulatory body across mortgages and other financial products simply makes good sense and the news that general insurance will also be FSA-regulated is part of the same attractive package.
In practice, most customers seeking mortgage advice simultaneously receive advice on other products such as life insurance, permanent health insurance and, of course, general insurance. The compliance aspects of the advisory process will be simpler and more efficient and, ultimately, more robust for consumers.
But it is worth waiting to ensure that the new regulatory environment is right. There is no point in rushing in the changes when the industry can take the time to think it through methodically.
The timeframes are yet to be clarified but it would be unrealistic to expect to see the changes put in place before the last quarter of 2003. The industry should take the time to consult and prepare. Only then can we finally look forward to reaping the rewards of a streamlined regulatory environment.
Colin Bell is strategic development manager at Charcol