"M-Day" arrives with consumers and industry in a strong position

This is a major extension of the FSA's role, involving direct supervision of thousands of firms and benefiting some 2.75 million UK consumers who take out a mortgage each year.

Among the many advantages of the new regime will be clearer information for consumers about both mortgages and mortgage services through newly introduced 'keyfacts' documents. Consumers will be able to compare mortgages more easily, understand the nature and cost of service they are receiving and have access to the Financial Ombudsman if they have a complaint.

The new rules cover mortgages that are entered into after 31 October. Customers who have applications in train when regulation starts should not experience any delay as a result of the changes, provided that their broker has been authorised by the FSA or is an appointed representative of an authorised firm. From Monday, customers will be able to check whether their broker is authorised, or an appointed representative, by looking at the FSA Register or calling 0845 606 1234.

John Tiner, FSA Chief Executive, said:

"The FSA has worked closely and co-operatively with the industry to ensure that firms go into the new era in a strong position. Under the new regime, consumers will continue to receive the benefits of the highly innovative UK mortgage market place, marked by a wide range of products, providers and delivery and advice channels.

Our focus now turns to the future supervision of the mortgage industry. An early priority for us will be to enforce the perimeter of the new regime and crack down on any firms that may consider continuing with unauthorised and illegal mortgage business."

The FSA has been working on the new regulation for four years, following the Government's decision to bring mortgages under the FSA's remit. Based on independent research involving interviews with a sample of firms in the mortgage industry, the FSA estimates that mortgage regulation will cost just 3.90 a month in the first year of an average mortgage.

Since April, the FSA has received many thousands of applications from the mortgage sector for authorisation or variation of permission and in a rigorous authorisation process every application was subject to checking. Many more firms have become appointed representatives of authorised firms. On Monday (1 November) the FSA will publish a summary of the information on the Register to indicate the numbers of firms authorised, those who have become appointed representatives, and those whose applications have been rejected or withdrawn.

Notes for editors

1. Key benefits of mortgage regulation are:

   • consumers will receive clear information pre-sale about both mortgages and mortgage services, that will allow them to shop around more easily;

   • where giving advice, firms must ensure they offer the consumer a suitable mortgage product;

   • price information (including the APR) in any mortgage advertising and marketing material must be clear, and any advantageous features of products quoted in advertising must be balanced by a description of any associated drawbacks;

   • both lenders and advisers have to consider the affordability of any mortgage that they identify for individual consumers;

   • there are new measures to help borrowers in arrears on their mortgage or facing repossession;

   • lifetime mortgages will be subject to additional disclosure requirements to take account of the higher risks associated with these products; and

   • mortgage borrowers will have access to an independent dispute resolution service the Financial Ombudsman Service (FOS) - and to the Financial Services Compensation Scheme (FSCS).

2. Cost figures have been calculated using figures drawn from Cost/Benefit Analysis carried out by independent consultants: - By Europe Economics and published in CP 174, Annex 1 in March 2003 and - By NERA, published alongside CP 186 in May 2003

   The 3.90 figure represents a combination of the one off costs of the mortgage rules of 136.3m (including systems costs) and the ongoing annual costs. The one off costs are assumed to be spread over five years.

3. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection of consumers; and fighting financial crime.

4. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.