Money: Farewell to the dodgy home loans

Shocking news from the property world: 95 per cent of mortgage brokers are breaking the rules of the game. A huge undercover shopping exercise by trading standards offices around the country found almost every broker was flouting the voluntary Mortgage Code in one or more ways. A breathtakingly hopeless result.

The Mortgage Code is the set of rules that is supposed to protect us from being ripped off or sold an unsuitable deal when we shop for a home loan. But more than three in 10 of the brokers visited didn't tell shoppers whether they were selling for one firm or giving an independent choice of deals.

People under pressure to use mortgage brokers att-ached to firms of estate agents should take special care. Agents in overheated property markets are sometimes quite blatant in suggesting they may favour your offer over someone else's if you get your loan from their man.

Mortgages are the last big plank of most people's financial plans to remain outside the legal protection of the official regulators. So if it all goes horribly wrong and you are sold an unsuitable and expensive fixed-rate, interest-only endow- ment with a hefty redemption penalty and compulsory insurances - tough.

You can start to unravel the problems through arbitration or an ombudsman scheme, but first you have to realise you are in a dud deal (which is hard enough when many mortgages are fiendishly complex). So wouldn't it be easier to feel warm and well protected before you sign up for a loan that may run into six figures and take most of your working life to repay?

The new Financial Services Authority (FSA) has an independent consumer panel providing a lobbying voice. It has not hesitated to recommend bringing mortgages into line with investments and regulating every aspect of their sale under the law. The Government is expecting to rule on the issue later this year.

I can't imagine there are many bets being laid on the Mortgage Code surviving much into the next millennium. It apparently has as many teeth as an ancient moggy.

A few voices in the mortgage industry still say it's too expensive and too complicated to give mortgage sales a proper legal framework. They point to existing rules which, put together, cover most aspects of buying a mortgage (endowments and other investments sold as mortgage repayment vehicles are protected under the law). The flaw is that you need a degree in pedantry to work out which bits of the sales process are covered by which laws. And where the hell do you go to complain?

Bringing everything to-gether under one roof at the FSA's new offices makes absolute sense.

The undercover shopping survey visited 166 offices, and a disheartening 40 per cent of these failed to offer "balanced and unbiased" mortgage information.

Sadly for the many dodgy mortgage brokers who will undoubtedly be driven out of business by tighter regulation, the bottom also seems to have fallen out of the used car market.