H.M. TREASURY NEWS RELEASE

HM Treasury News Release

122/99

20 July 1999

MORTGAGE REGULATION CONSULTATION

Consultation, including a public seminar, to seek views on whether there is a case for statutory regulation of advice on and the marketing of mortgages was announced by Economic Secretary Patricia Hewitt today.

Announcing publication of a consultation document on mortgage regulation, Ms Hewitt said:

"For many people, taking out a mortgage loan is the biggest financial transaction that they will undertake. Almost 11 million people in the UK now have mortgages. We do not know enough about whether people are getting a good deal or a bad deal out of the mortgage market. We are conducting a wide ranging review to get a better picture of what is going on and of borrowers' concerns.

"This consultation will help us to do that, and get views on whether the voluntary code introduced by the mortgage industry is effective and gaining the confidence of mortgage holders.

"The Financial Services and Markets Bill will give us the tools to get the FSA to step in if we are not satisfied that mortgage holders are getting a proper service from the industry. We welcome views about whether we should activate the reserve power in the Bill and to tell us about any concerns they may have."

The Financial Services and Markets Bill currently before Parliament proposes reserve powers to give the Financial Services Authority (FSA) responsibility for regulating advice on and marketing of mortgages. Ms Hewitt said on publication of the Bill that she is reviewing the position and intends to announce by the end of the year a decision on whether these provisions should be activated.

Responses to the consultation should be sent to the Treasury by 22 October. Unless confidentiality is requested, responses may be published. The date and venue of the public seminar will be announced shortly. Depending on demand, further seminars could be arranged at other venues around the country.

Responses will be taken into account in the current review of mortgages, which is considering the effectiveness of the voluntary code of practice introduced by the Council of Mortgage Lenders in July 1997 and a cost benefit analysis of the potential cost of regulation to mortgage holders being conducted by the FSA.

NOTES FOR EDITORS

The Financial Services and Markets Bill was published on 17 June 1999 (HM Treasury press releases 98/99 and 99/99.) Clause 20 sets out the reserve power for the Treasury to make a regulated activities order giving the FSA responsibilities to regulate a range of activities set out in Schedule 2 to the Bill.

The powers reserved under the Bill, if activated, would mean that the selling of mortgages would be subjected to similar rules to those governing the sale of other personal financial products, such as personal pensions.

Copies of the consultation paper - Regulation of Mortgages : a discussion document by HM Treasury - can be obtained from, and responses returned by 22 October 1999 to :

Janet Robbins
Rm 116/G
HM Treasury
Parliament St
London
SW1P 3AG

Website : www.hm-treasury.gov.uk.

Telephone: 0171 270 5294

Fax: 0171 270 4694

e.mail : janet.robbins@hm-treasury.gov.uk

While welcoming comments on all aspects of mortgage lending, the paper particularly invites responses to ten questions, including the nature and extent of any damage consumers suffer in the mortgage market now and the effect of imposing regulation on lenders and consumer, for example on costs and working methodology (eg speed of processing applications).

The written consultation will be supplemented by a seminar, open to the public and interested bodies, to stimulate debate on the way forward in this area. Depending on demand further seminars may be arranged around the country. All those interested in attending should contact Janet Robbins at the address above.

Information about the industry's voluntary code can be found by telephoning the Council of Mortgage Lenders on 0171 437 0075 or on their website: www.cml.org.uk.

Media enquiries should be addressed to Charles Keseru at the Treasury Press Office on 0171 270 5188.

If you have access to the Internet, you can find this news release and other Treasury information at www.hm-treasury.gov.uk