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Treasury boosts IFAs on estate agent introducers

Mortgage introducers such as estate agents and housebuil-ders will have an incentive to refer potential borrowers to an IFA rather than a tied agent to avoid full FSA regulation under Treasury proposals.

Packagers may also escape full FSA regulation if they do not arrange mortgages or give advice but res-trict themselves to providing information.

The Treasury&#39s Regulating Mortgages consultation document, published last week, sets the framework for the new regime, which is due to come into effect in the second quarter of 2004.

But some commentators believe introducers may still have to be regulated because many IFAs will change status as a result of plans for depolarisation.

The paper says all “firms or people engaged in advising or arranging aspects of a regulated mortgage contract” will need to be authorised by the FSA unless they refer potential borrowers to an independent adviser or appointed representatives of an authorised person not tied to one lender.

The industry is calling for clear definitions of the terms “advising” and “arranging” so it is obvious who and what is covered. The Treasury&#39s suggestion to lift the £5 limit on a brokerage fee where advice does not lead to the client buying a mortgage has been welcomed by brokers but some warn that a limit is needed as protection against rogues.

Britannic Money spokes-man James Mayne: “If the depolarisation review has its way, then an &#39independent adviser&#39 will be fee-based or defined-payment based. We do not predict that many brokers will go down this route so many estate agents will have to be authorised.”

Mortgageforce managing director Robert Clifford says: “The £5 maximum fee is crackers and I was astounded when the OFT determined that this 30-year-old rule was not to be removed. Sense appears to have prevailed and the proposals look to rightly permit professional advisers to charge an appropriate fee and to retain it.”

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