&#39Common sense&#39 not to regulate housebuilders

Brokers say the Treasury&#39s decision not to regulate housebuilders and other third-party introducers – wherever they send mortgage enquiries – is a triumph for common sense.

Under the original consultation on mortgage regulation, only those firms that refer clients to independent sources of advice were exempt from regulation.

Now the Treasury has confirmed that introductions to any authorised person or appointed representative – “whether independent or otherwise” – will be exempt from regulation.

David Hollingworth, mortgage specialist at London & Country, says: “I think it&#39s common sense. As it was, the likes of Barratts or Wimpey would have had to be an authorised firm in order to pass on mortgage referral business, which would involve more staff and more cost for everyone.” And Kevin Morgan, managing director of Hertfordshire-based EZI UK, says: “This is only reasonable. There was no real reason for making a distinction between independent advisers and other authorised firms in the first place.”

The new exemption comes with some caveats. The Treasury specifies that the introducing firm must not handle any money paid by the client in connection with any transaction completed with the authorised mortgage adviser.

And before making the introduction, the introducer must disclose if they are a member of the same group as the authorised person. The Treasury decided on broader grounds for exemption after respondents complained that existing proposals would have “a significant impact on the structure of the market”.

The respondents argued that consumers who use estate agents or housebuilders as introducers would be “adequately protected by the fact that the authorised firms to which they are introduced are subject to FSA rules”.