The Government is proposing a new set of measures which will give the Financial Services Authority more power to protect mortgage borrowers, including buy to let customers.
The Treasury has announced that the Government is proposing the expansion of the FSA's umbrella of regulation to include the buy to let mortgage sector and second-charge mortgages.
In addition to buy to let mortgage customers, those borrowers whose mortgages are sold onto third parties will also come under the remit of the FSA if the new proposals come into force, under regulations which require the fair treatment of customers.
The recent housing crash was largely due to lenders selling subprime mortgages onto third parties such as hedge funds and private equity firms, but the new legislation will ensure that in these situations the borrower is afforded the same protection as they would if their mortgage was still with the original lender.
Commenting on the proposals, Exchequer Secretary Sarah McCarthy-Fry said: "Since the onset of the global financial crisis, the Government has worked hard to ensure mortgage borrowers are treated fairly by their banks."
The focus of the Treasury, she said, has been to help people remain in their homes by limiting the number of repossessions as much as possible.
"But we are aware that this crisis has raised issues around the world about the regulation of the mortgage market," Ms McCarthy-Fry added. "We are determined to reform the system for the future, to offer both stronger protection for consumers and greater stability in the housing market."
The Association of Mortgage Intermediaries (AMI) has given its support to the proposals to extend the FSA's scope to include the buy to let mortgage sector.
Director of the AMI, Robert Sinclair, said: "It is right that the proposals will exempt limited companies and focus on individuals who carry out buy-to-let transactions. Broadly, this appears to be codification of existing industry best practice, and should not introduce significant additional costs."
However, he added, "this consultation, combined with the more extensive Mortgage Market Review, proposes wide ranging changes to the market. Government and the regulators need to ensure that any reform is implemented in a coordinated and efficient fashion with suitable time periods to allow the industry to adapt."
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