So was M-Day a turning point for borrowers?

Key Facts Illustrations are useful only if people read them
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The Independent Online

It might not sound worth celebrating, but if you've bought or sold a house in the past 12 months, you will have been affected by the event that took place a year ago. On 31 October 2004, the selling of mortgages came under the remit of the City watchdog, the Financial Services Authority.

The aim of regulation was to improve life for the consumer, by offering better protection and access to redress. It also became easier to compare products.

Mortgage lenders and intermediaries now have to abide by much tighter rules in their dealings with customers. An Initial Disclosure Document (IDD) must be provided, telling potential borrowers about the kind of service they can expect. They must also supply a Key Facts Illustration (KFI), which shows the true cost of the mortgage.

While the industry has been adapting to the new regime, it is possible that you, the consumer, haven't even noticed. "There is no doubt borrowers can now benefit from greater levels of protection," says James Cotton from broker London & Country. "But many people simply aren't aware of the changes."

Whatever our levels of knowledge, Mark Harris at broker Savills Private Finance agrees that mortgage regulation has been a positive move for consumers and the industry alike.

"All the charges and costs must be set out at the start, while lenders and brokers must now deal with customer complaints within a specified time."

Further, he adds, borrowers must be informed that they can take a complaint to the Ombudsman if they are not happy with the way their problem has been resolved.

But while regulation has brought many benefits to customers, it has not been all plain sailing.

"The KFI is a great idea in theory, as it enables clients to compare different mortgages," says Mr Harris. "But in practice, it is overlong and complicated and can be offputting."

Mr Cotton adds that KFIs are useful only if people read them. That said, the FSA is aware of the problems, and is working with lenders to improve the content of the document.

The cost of complying with mortgage regulation continues to remain a concern for the industry.

"Lenders have been forced to spend a considerable sum of money upgrading their IT systems and training staff," says Mr Harris. "Some of these costs have inevitably been passed on to the consumer."

Simon Tyler of Chase de Vere Mortgage Management says this is reflected in the higher interest rates paid by consumers since M-Day. "We still have some excellent mortgages on offer, but lenders' profit margins have still expanded significantly compared to when base rates were at 4.5 per cent back in 2001."

And it isn't just rates that have risen. Mr Cotton highlights the increased cost of seeking advice: "We have already seen some previously fee-free brokers introduce fees as a result."

* To coincide with the first anniversary of regulation, the FSA last week launched a website to educate consumers about mortgages at

It offers resources such as budget calculators and mortgage tables, and tips on how to find the best deal.

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