Today sees the introduction of regulation for mortgages and insurance designed to help with care fees in old age, known as long term care insurance. The industry regulator the Financial Services Authority today brings mortgages and long-term care insurance under its wing, in an attempt to better protect consumers.
General insurance contracts, such as house and car insurance and some life insurances will also fall within regulation from 14 January 2005.
Our View
Regulation of these products is fantastic news for consumers and will mean a more transparent and easier to understand transaction for all. What we are not happy with is the apparent ‘light touch’ regulation that is being given in respect of mortgages. It is also worse, in our view, for general insurance.
Whilst we understand that transactions need to be as clear and simple as possible, some of the rules that already work for other products have not followed through into mortgages. An example is the disclosure of commissions. Currently, when we arrange products and our client wishes us to take commission, we must disclose the exact amount received. With mortgages, only commission above £250 needs to be disclosed. We do not believe this to be fair or clear.
Nevertheless, the regulation of mortgages has been long overdue and will most definitely raise the standard of the financial services industry. As soon as general insurance is included with regulation in January, the only thing left is home reversion schemes. Home reversions are a version of equity release and the Government has finally conceded they need regulation. Whilst a date for this has not yet been planned, it is expected within the next few years.