press release

Press Release - 23/09/04

MORTGAGE BROKERS SUSPENDED BY MONEYNET AS CONCERNS FOR HOUSE BUYERS AND SELLERS GROW

MONEYNET has suspended a number of its mortgage broker intermediaries amidst fears that many existing broker firms will be forced to cease trading when the Financial Services Authority assumes responsibility for regulation on the 31st October.

The move - believed to be the first of its kind - comes as concern grows for thousands of home buyers who could lose out on their property transactions as the 'M Day' deadline looms.

The initiative by Moneynet - which has itself won full FSA approval to arrange regulated mortgage contracts - reflects concerns that many UK brokers will not be compliant under the watchdog's strict new regulations*.

According to FSA sources, less than a third of all mortgage brokers are geared up to trade under the new rules - which means that hundreds of thousands of homebuyers could be left high and dry in mid-transaction.

"This is a potential disaster waiting to happen for many purchasers and sellers," said Moneynet chief executive Richard Brown.

"We are in the middle of what is traditionally one of the busiest times of the year for mortgage transactions and we learn that the majority of mortgage brokers have not yet applied for authorisation.

"This inevitably means they will be required to cease trading on 31st October. The consequences for homebuyers and sellers could be appalling, with many applicants having to start the entire mortgage process again," said Brown.

Along with the obvious fears for consumers, Brown said that the wider mortgage market - already struggling on the back of the recent base rate rises - is likely to suffer a considerable body blow.

He urged consumers to check that their broker has the necessary authorisation in place so as to be sure of completing the mortgage transaction uninterrupted.

Frankly, the mortgage industry cannot afford to lose clients at this critical "time of year. Those brokers that have not yet applied for authorisation are unlikely to have the necessary permission in place to trade after 31st October, even if they apply now."

A spokesman for the Council of Mortgage Lenders today admitted that it had "serious concerns" regarding the apparent level of apathy among brokers.

"Around 50 per cent of all mortgage activity is conducted through brokers, and we are aware that many of them have been dragging their feet in the face of this impending new regulation. Any brokers that have not so far taken action would be advised to do so immediately," said the spokesman.

Summary of new FSA regulations for mortgage brokers effective from 31 October 2003

- consumers will receive clear information about both mortgages and mortgage services. This will allow consumers to more easily shop around. They will be able to compare mortgages more easily, and understand what service they are getting (including any fees that will apply);

- small print cannot be used to hide important information;

- 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;

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

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

- charges must not be excessive - and any charge imposed where the consumer either repays early or goes into arrears must be limited to a reasonable pre-estimate of the costs arising from the consumer's action;

- new standards apply ensuring the fair treatment of consumers in payment difficulties or facing repossession; and

- higher-risk mortgages - lifetime mortgages - will be subject to additional requirements - both on disclosure and on the training and competence of advisers.

- mortgage firms will have to meet FSA high level standards for authorisation including capital, approved persons and PII cover.

PRESS ENQUIRIES

Richard Brown, Chief Executive, 0208 313 9030

David Andrews/Cathy Tully, David Andrews Media Ltd 07941 255855 / 01273 774109 / 07747196854

Consumer enquiries: info@moneynet.co.uk / www.moneynet.co.uk

Moneynet.co.uk is the UK's longest established online personal finance research and data analyst company. The company offers consumers a choice of thousands of low cost financial services products. From mortgages, personal loans to motor, home and medical insurance, credit cards, savings accounts and best buy fixed rate products, Moneynet is one of the most comprehensive online services of its kind in the UK. Founded by chief executive Richard Brown, the Moneynet brand is destined to become one of the UK's major players in consumer finance products.

A DAVID ANDREWS MEDIA LTD - RELEASE FEBRUARY 2005