Brokers claim that mortgage regulation by the FSA could actually increase the risk of misbuying in the industry.
Mortgage Talk identifies proposals for 'non-advised sales using filtering questions' as a particular worry, which could easily be interpreted as offering a recommendation to use a particular type of product.
Peter Birch, a director of Mortgage Talk, says: 'While I feel that, overall, the FSA's suggestions are a good thing, I'm worried that many consumers will be unable to distinguish between advice and information.
“On the one hand, a qualified mortgage broker can give a recommendation on a product or type, while on the other the customer is merely informed about a product by an unqualified individual. But the boundaries are unclear and consumers can't be expected to understand the technical distinction between them.”
But the difference is vitally important, says Birch, as those questions that fall into the 'non-advised' category are not subject to FSA regulation.
As such, consumers could be sold a product that in theory they have not been advised upon, even thought they believe that it was formally recommended to them by an advise r.
He says: 'With the deadline for industry comment on the proposals already passed, the FSA is aware of the disquiet in the mortgage industry relating to this issue. Professional brokers are worried that the suggestions contained in CP146 are simply not rigorous enough.”
He adds: “The UK mortgage market contains a huge range of products, including self-certification and sub-prime mortgages, where the customer needs to receive proper guidance from a qualified advisor. If these proposals come into force in their present form, the public is in danger of misbuying unsuitable products, sold in a half-hearted manner.
“Consumers should also be made aware of the potential dangers inherent in failing to regulate second charge mortgages and equity release schemes. These are possible high risk products and should be controlled by legislation.”