In a consultation paper the reg-ulator proposes a two-stage approach to regulation, with an interim regime being brought in from July and full regulation by 2010.
Under the interim regime firms will have to meet FSA threshold conditions including the requirement to be run by fit and proper persons, to adhere to its Principles for Business and to meet some of its systems and controls and conduct of business rules.
The second stage will involve full authorisation, prudential requirements and further conduct of business rules.
The government’s decision came after the Office of Fair Trading conducted a review of the market and found customers were being misled by providers.
Michael Coogan, director-general of the Council of Mortgage Lenders, says lenders can’t always avoid moving towards repossession action and that sale-and-rent-backcould provide an option of last resort if it is regulated properly.
He adds: “We look forward to the implementation of regulation. In the meantime, consumers should ensure they have explored all options with their lenders before considering this route. And if they choose sale-and-rent-back they should be careful.”
Yvette Cooper, chief secretary to the Treasury, says: “Many people are worried about their homes and mortgages right now and unscrupulous firms must not be allowed to exploit this with dodgy deals that end up pushing borrowers out of their homes.”
Claire Barker, chairman of the Equity Release Solicitors’ Alliance, says: “Full regulation of sale-and-rent-back will protect consumers from mis-selling and ensure that they only deal with fit and proper providers.”