So do mortgages now feel as safe as houses?

Laura Howard and Julian Knight ask if consumers are better off after three years of FSA protection

Next week will mark three years since the Financial Services Authority (FSA) started regulating the multi-billion- pound mortgage market.

A brave new world was promised where British consumers could shop around in the knowledge that they would enjoy greater protection and transparency at no extra cost. Instead, though, critics say mortgages have become more expensive and consumers are still vulnerable to poor practice.

The Council of Mortgage Lenders (CML) reckons regulation has added over £500 to the cost of purchasing a home as lenders and brokers now have to pay an annual fee to the FSA as well as meet the expense of producing Key Facts Illustrations (KFIs), which set out the main points of a mortgage to make it easier for borrowers to compare deals. And according to the financial analyst Moneyfacts, the average arrangement fee on a fixed-rate mortgage among the 10 biggest lenders is now £681.60 – against £321.40 in October 2004.

Moneyfacts spokeswoman Lisa Taylor reckons the initial hike in fees was a result of regulation. Subsequently, she says, high arrangement fees have been used as a tool to keep headline rates of interest low.

Mortgage advice is also reported to have become more costly. Richard Farr, managing director of the Association of Mortgage Intermediaries (AMI), talks of "bigger financial burdens", and Ray Boulger, technical manager at broker John Charcol, says the proportion of middlemen charging their clients a fee for advice, as well as receiving commission from the lender, has "risen considerably" since regulation.

But it's not all bad news. Which?, the consumer group, welcomes the fact that mortgage customers now have access to the Financial Ombudsman Service to help settle disputes with firms. "If standards are not found to comply with regulations, consumers have a clear complaints process," says Vera Cottrell, policy adviser at Which?.

However, she notes that Which? "mystery shopping" exercises have found little difference in the quality of service provided to mortgage customers pre and post FSA regulation.

But according to a study by the FSA itself, three-quarters of mortgage customers find KFIs very useful. Furthermore, lenders now find it harder to repossess a property. "This can now only take place if other options such as a repayment plan have been exhausted," says FSA spokesman Robin Gordon-Walker.

As for curbing dodgy activities among lenders and advisers, he thinks the FSA is making strides. "With one to two million mortgages arranged every year, a handful could get through the net. But we are always judging the effectiveness of regulation and are adaptable."

The watchdog can, at least, claim it has bared its teeth on the subject of mortgage exit fees – though even here there are criticisms. The FSA acted following complaints over the increasing amounts charged by lenders for completing the paperwork at the end of a mortgage term; in some instances, fees had trebled in just a few years. Consumer groups suggested that the fees bore no relation to the work being undertaken.

The FSA's solution was to instruct mortgage firms to cap their fees and to compensate those who had been charged over the odds in the past. However, much to the anger of consumer groups, the FSA decided it was up to consumers to contact lenders for the money.

There is also growing disquiet that lenders are hiking arrangement fees to offset lower exit charges.

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

    £16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    Day In a Page

    The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

    They fled war in Syria...

    ...only to get stuck and sidetracked in Hungary
    From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

    Title sequences: From The Prisoner to Mad Men

    Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
    Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

    Giorgio Armani Beauty's foundations

    Sumptuous fabrics meet luscious cosmetics for this elegant look
    From stowaways to Operation Stack: Life in a transcontinental lorry cab

    Life from the inside of a trucker's cab

    From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
    Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

    Kelis interview

    The singer and sauce-maker on cooking for Pharrell
    Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

    Cameron lowered the flag for the dead king of Saudi Arabia...

    But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Humanity must be at the heart of politics, says Jeremy Corbyn
    Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

    Joe Biden's 'tease tour'

    Could the US Vice-President be testing the water for a presidential run?
    Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

    Britain's 24-hour culture

    With the 'leisured society' a distant dream we're working longer and less regular hours than ever
    Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

    The addictive nature of Diplomacy

    Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
    Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

    Fashion: Ooh, Lady Chatterley!

    Take inspiration from DH Lawrence's racy tome with equally racy underwear
    8 best children's clocks

    Tick-tock: 8 best children's clocks

    Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
    Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

    Charlie Austin: ‘If the move is not right, I’m not going’

    After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea