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Cost of regulation little value to consumers, reveals IMLA

Research by the Intermediary Mortgage Lenders Association earlier this year has revealed that many lenders have seen little value for the substantial costs to consumers from mortgage regulation.

These research findings triggered IMLA to conduct further research, this time among the intermediaries that provide IMLA members with most of their mortgage business.

This additional research has confirmed that this view is
also held by intermediaries.

The new intermediary research, carried out over July and August, revealed the following findings;

* 60% of intermediaries had seen their costs increase by more than 10% due to mortgage regulation with over 21% claiming costs had increased by more than 20%.

* 72% of intermediaries felt that mortgage regulation had brought no benefit to their customers

These findings clearly support IMLA’s earlier research which showed that the benefits of mortgage regulation cannot be justified on a cost benefit basis. Additional findings from the intermediary research highlighted that:

* 60% of mortgage customers only obtain one or two Key Facts Illustrations’s with the average
for all customers of 2.3

* Over 40% of intermediaries believed their clients did not read the KFI properly.

* 60% of intermediaries believed their client didn’t understand the various components of the KFI.

* Nearly 70% of brokers believed their client didn’t use the KFI to compare products

* 68% of intermediaries didn’t believe that their client got better advice as a result of mortgage regulation

One final area that the research highlighted was the attitude of intermediaries to packaging, an area where some confusion still exists.

The majority, 67%, believe that all packagers should be regulated.

Tim Dawson, chairman of IMLA, says that one of the most important objectives of mortgage regulation was to enable consumers to make more informed

He says: “It is becoming clear that despite the enormous time and cost incurred by lenders, intermediaries and customers, regulation has not achieved its main objectives.”

“The research also found that the majority of intermediaries would like to see regulation simplified, with less paperwork involved.

“MCOB currently runs to 483 pages, so we see this as being quite a challenge.

“We believe that the FSA should take the opportunity in 2006 to work closely with the industry’s professional bodies, to review how the current regulatory framework can be simplified to deliver real benefits to the consumer in a cost effective way.”


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