Money: Let's put an end to mortgage malpractice

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The Independent Online
y partner didn't understand then, and still doesn't understand now, what kind of mortgage he has."

That's an extract from a reader's letter. But it could equally apply to my partner (perhaps an understandable weakness in a man married to one of the UK's leading mortgage bores) and just about anyone else.

Other than those of us paid to do so, very few people really understand mortgages. And this lack of understanding is the only reason the Government should need to include home loans in its new financial legislation. At the moment mortgage salesmen are free to mislead, overcharge and deliberately confuse us with small print and jargon.

Not all of them do it. The big lenders have too much to lose to want to scalp customers. But there's a whole underworld of unscrupulous middlemen out there. These mortgage brokers are reliant on commission and notionally have to keep to a voluntary code of sales conduct, called the Mortgage Code. But a whistleblower from inside the Code's HQ has just exposed some dark secrets.

Monty Burn worked as the compliance officer for the Mortgage Code Register of Intermediaries (MCRI). He got the sack last week for publicising abuses. These include the continued mis-selling of endowment policies and overpriced mortgage insurance; brokers who don't refund upfront fees for mortgage applications which don't go ahead; and cold-calling of potential clients.

The Government is to investigate Mr Burn's claims before it decides whether to go ahead with giving regulation the force of law. It has already taken some steps to put the screws on the mortgage industry. The Financial Services and Markets Bill, which is likely to become law next Easter, has been set up so that mortgage regulation can be added to the powers of the new super-regulator, the Financial Services Authority.

The Government says it is prepared to activate the statutory regulation if "we are not satisfied the voluntary code is working". Treasury officials say it will take until the end of the year to come to a decision on mortgage regulation. They must be spending an awful lot of work time gossiping around the water cooler, because it should take them about five minutes.

Officials who need convincing should take a look at what happens in the real world. I walked into a local estate agent a few weeks ago and tried to get on its mailing list. I was taken aback when the youth in the three- piece suit took the opportunity to launch a persistent and unwanted pitch to get my mortgage business.

Lenders and brokers argue that regulation will be expensive and they are threatening to pass that cost on to customers. I can't see it happening. The competition for our business is too hot for that.

We need to drive the cowboys out of business and regulate the rest of them so tightly they squeal.