Your money: New code to help worried borrowers

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Borrowers left confused by the plethora of home loans available were last week offered increased levels of protection by the Council of Mortgage Lenders (CML), which launched a new code of conduct for members.

The code, which comes into effect on 1 July, will place mortgages in one of three levels. The first is advice plus a recommendation by the lender, based on borrowers' circumstances. The second is where information on a range of products is given, enabling the borrower to make a informed choice. The third level is where information is given on one product only, either because the lender sells that one alone or because the borrower has already decided. Lenders will tell potential borrowers at the outset which levels of service they provide.

As part of the code, the lender must also give details of why advice to take out a particular loan is being given. Information about charges must also be given before the mortgage is taken out.

The CML hopes its code will help to clear up remaining areas of dissatisfaction among borrowers, many of whom may be reluctant to dip their toes in the housing market for fear of being saddled with debts whose consequences they did not understand fully when they were taken out. The code allows disgruntled borrowers a final arbitrator who would be in a position to offer awards of up to pounds 100,000 to people who believe they have been badly treated by their lender.

However, as consumer groups have complained, the code, which is voluntary, does not affect mortgage intermediaries and brokers, who now contribute growing slices of business for many lenders. The CML said last week that it is holding talks with a range of intermediaries in the hope that they will be prepared to subscribe voluntarily to the code.

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