DTI proposes new powers to `clean up' mortgage selling
Thursday 11 March 1999
Stephen Byers, the Secretary of State for Trade and Industry, is proposing new powers for the Financial Services Authority to take action against unfair mortgage terms as part of his competition package.
The FSA - until now not expected to supervise mortgage selling in any way - will have powers to take action under Unfair Terms in Consumer Contracts regulations, usually the provenance of the Office of Fair Trading. Further proposals include a single European formula for calculating the annual interest payable on a mortgage, allowing homebuyers to compare mortgages with continental lenders.
"For most people taking out a mortgage is the biggest and most complex financial commitment they make in their lives. It's now a fiercely competitive market, which is good for the housebuyer, but it's important to make sure they are not misled," said Mr Byers.
He also proposes to force lenders to include a "wealth warning" in mortgage advertising. The suggested wording will say: "Your home is at risk if you do not keep up repayments on a mortgage or other loans secured on it."
The proposals follow comments from Patricia Hewitt, Economic Secretary to the Treasury, that she would review the effectiveness of mortgage self- regulation this year. She warned that consumers were unhappy with the method of self-regulation through the voluntary Mortgage Code.
Some lenders welcomed the proposals. Ian Chippendale, chief executive of Direct Line, said: "We want a market where competition is based on quality and cost and is not reliant on trapping consumers into long-term products with unreasonable terms and conditions."
The proposals, subject to consultation over the next year, follow Gordon Brown's Budget announcement of league tables on the cost of savings and pensions products.
The FSA yesterday said it would in June begin a consultation on the league tables, which could be updated monthly or even weekly.
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