A missed chance to clean up mortgages

A classic case of missed opportunity took place last week as the Government's long-awaited announcement on mortgage regulation failed to address the main issues that trouble home buyers. Two weeks ago in these pages I predicted the proposals wouldn't go far enough. My fears were well-founded.

A classic case of missed opportunity took place last week as the Government's long-awaited announcement on mortgage regulation failed to address the main issues that trouble home buyers. Two weeks ago in these pages I predicted the proposals wouldn't go far enough. My fears were well-founded.

It's enough to make you want to bang your head on the table. Confusion still reigns, despite the fact that this was a real chance to clear up the archaic and impenetrable jargon that the mortgage industry insists on pedalling. Why is the annual calculation of interest still allowed when daily interest is so much fairer? Why have overhangs - when you are forced to pay a penalty for switching mortgages years after your discount period has ended - not been abolished?

Melanie Johnson, the Economic secretary, who makes a good job of reading a speech but is not so good at a spontaneous response to questions, refuses to address these issues. When she rang me to clear up what she referred to as the "misleading information" that had appeared in the papers following the announcement, I asked her why she has ignored areas that have long been a bugbear to consumers. Typically, she blamed the critics for being out-of-date. "They have held their agenda for some time, but we have changed the landscape," she said. "We are tackling the problems that people have identified with their mortgages."

But is she? The introduction of voluntary CAT standards - guaranteeing mortgages carrying this Government's benchmark are low cost, have easy access and simple terms - is welcome. But it is not a blanket requirement. Lenders can introduce CAT mark mortgages if they wish, and promote them alongside their existing range of loans. It begs the question: why would they? Why promote a cheap loan without expensive tie-in clauses if you can sell one of your old ones that makes more money? What possible incentive is there for the lender to push a CAT-standard mortgage? Of course they'll all offer them, and several, such as the Halifax, have already said they are ready to introduce a CAT-standard mortgage. But it's not enough merely to appear to be helping the home-buyer.

Ms Johnson probably realises the mortgage industry would be up in arms if she tried to impose CAT standards on all lenders. So she's skirted round the issue with piecemeal reform. The result is a wishy-washy attempt at "lite" regulation, all talk of requiring mortgage lenders to "spell out charges in plain English" that means little in practical terms.

No wonder the big mortgage lenders have welcomed the reforms. They are no doubt rubbing their hands in glee at their escape from anything approaching decent regulation of the industry. We may be in the 21st century, but our mortgage regulation is still stuck firmly in the last one.

* m.bien@independent.co.uk