The review says the FSA’s paper later this year reviewing mortgage conduct of business rules will look at whether or not extension of its regulatory scope to these sectors is necessary.
The Turner Review says: “The paper will consider whether more effective regulation of the mortgage market, through tighter conduct rules or direct product regulation, would require the extension of the FSA’s remit to cover second charge mortgages and buy-to-let mortgages.”
Mortgages for Business managing director David Whittaker is concerned about how the FSA would implement buy-to-let regulation.
He says: “There is a difference between someone who buys a buy-to-let property as an extension to their pension fund, who might need more protection against bad advice, and someone who owns 350 buy-to-let properties, who has a limited company in his own name, who might arguably know more about the sector than the FSA itself, and would not need the same degree of protection.
“I am not sure how the FSA can make that distinction.”
Whittaker also warns there is a danger that more transactions are driven into the commercial loan sector where he warns investors could be exposed to even greater risks.
But Landlord Mortgages managing director Lee Grandin welcomes the news and says he has been calling for FSA regulation of buy-to-let mortgages for years.
He says: “There has always been an opportunity for people to be misled when taking out buy-to-let mortgages, particularly where off-plan new build properties are concerned, but often the problems only materialise in a downturn.
“Our firm has always followed the FSA’s MCOB guidelines in sales of buy-to-let mortgages even though this was not compulsory.”