Safe as houses?
THE lack of protection for people taking out mortgages has come under the spotlight again as potential gaps in regulation have been spotted by a consumer panel.
The review group on Banking Services Consumer Codes, appointed by Chancellor Gordon Brown, has raised concerns about the lack of compulsory regulation for the UK's 13,000 mortgage brokers.
The group says self-regulation among mortgage brokers is not strong enough to protect consumers from bad advice.
Mortgage brokers are self-regulated and can sign up to a voluntary set of rules called the Mortgage Code.
This covers level of service, information given to customers and charges. But crucially it takes no account of the history of lenders, relying instead on a promise to deliver good service in the future. Other financial products, such as pensions and investments, are regulated by City watchdog, the Financial Services Authority, and are part of the Financial Ombudsman Scheme.
Mick McAteer, senior policy adviser at the Consumers' Association, says: 'Mortgages are the biggest investments most of us will ever make, yet only have a sprinkling of voluntary regulation. This is a major anomaly.'
Another concern is that mortgage brokers are outside the Financial Ombudsman Service which provides compensation for consumers when buying financial products. Instead, mortgage brokers have a scheme called the Mortgage Code Arbitration Scheme. This mirrors the Financial Ombudsman Scheme with compensation going up to £100,000, but is not compulsory.
A major criticism levied at the mortgage industry is that to give advice on mortgages at the moment, you don't have to be qualified - which means anyone can do it. But the Mortgage Code is addressing this issue and is to make existing and would-be brokers sit professional qualifications before letting them register.
Justin Hampshire, 32, and his partner Nuala Whelan, 33, recently bought a four-bedroom house in South-West London. The couple went to a mortgage broker having previously just walked into a bank or building society and taken what was on offer.
Mr Hampshire, a corporate controller, says: 'It's absolutely bizarre how you can buy a home for £200,000, pay £400,000 altogether with interest and the whole process is hardly regulated. I think the banks and building societies should be offering more help as anyone can give advice at the moment.' He adds: 'I have been a homeowner for nearly ten years now and have been lucky to get excellent advice in that time.'
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