View more on these topics

FSA unable to rule out some dual regulation

The FSA has outlined the scope of the mortgage regime, but warns that some firms will still need a consumer credit licence.

To avoid dual regulation, mortgages that meet the definition and which could presently be regulated under the Consumer Credit Act (CCA) will become the FSA&#39s responsibility when the new regime goes live.

However, if firms which arrange mortgages within the definition (and which require FSA authorisation) also arrange second charge loans and other mortgages not within the new regime, it is likely that they will continue to need a consumer credit licence.

A mortgage will be regulated if the borrower is an individual or trustee; the lender takes a first legal charge over property in the UK, and the property is at least 40% occupied by the borrower or by a member of his immediate family. The mortgage definition does not cover buy-to-let mortgages (unless the tenant is a member of the borrower&#39s immediate family), second charge loans or any loans to limited companies.

Regulate activities are mortgage lending; mortgage administration; advising on mortgages, and arranging mortgages. Where the regulated activity is carried on from an establishment in the United Kingdom, the firm will need to be authorised and comply with the mortgage rules if the consumer is normally resident in the UK or another European Economic Area (EEA) state.

The FSA has also published draft perimeter guidance to help firms understand the legislative scope, because it may not be clear to all businesses whether an activity is within FSA scope or falls outside the regulatory perimeter.

The FSA has identified a few post-sale contract variations where it consider that rules, particularly in relation to disclosure, should apply. These are further advances, product switches, transfers of equity and transfers between types of mortgages (for example, interest only and repayment mortgages). The FSA&#39s assessment is that these variations are likely to present the same (or lower) risk as the original loan and the FSA has adapted its rules to deal with each variation.


FSA seeks to define independence in the mortgage market

The FSA is consulting on whether it should place requirements on firms in the mortgage market who choose to call themselves &#39independent&#39 and, if so, whether this should apply to both advised and non-advised sales. It also considers whether firms should adopt a different status in relation to different regulated products, for example, being independent […]

Pre-application illustrations here to stay

The FSA&#39s consultation on regulating mortgage sales confirms that controversial pre-application illustrations are here to stay. The need for a personalised PAI for each mortgage applicant was originally proposed in CP98. In its latest CP146 consultation, the FSA says: “We consider that the principle behind this approach to product disclosure still applies. “This is that […]

FSA draws line between &#39advice&#39 and &#39non-advice&#39

The FSA has identified three types of sales process in the mortgage market. These distinguish between advice and non-advice, and as such will attract different regulatory responses. The three sales processes are: advised sales &#45 here, the FSA proposes to use the definition of advice set out in the legislation, that is, advice on the […]

Equity release “high-risk product” says FSA

The FSA has proposed that different types of mortgage carry different levels of risk in CP146, its latest consultation paper on mortgage regulation. The FSA proposals include assigning different levels of risk to different products, with equity release – or lifetime mortgages in FSA parlance – included within the higher risk bracket. Mortgages where the […]

'Feeling the Squeeze'

Royal London carried out a UK wide survey with 2,500 consumers age 35-44 over the summer. The survey found that over a third, 34 per cent, said their finances felt Squeezed and so were struggling to meet day-to-day expenses, despite 87 per cent being aware that they need to save more. However, the survey did […]


News and expert analysis straight to your inbox

Sign up