Firms advising on first-charge mortgages regulated under the Consumer Credit Act 1974 will have to change their permissions if they want to carry on doing so, the FCA has said.
The City watchdog has published a consultation paper into the changes, which means the regulatory footing of these mortgages will change.
From 21 March 2016, administering a regulated mortgage contract in relation to pre-2004 first charge consumer credit act mortgages will become a regulated mortgage activity.
The 23-page document said: “Government also plans to expand the definition of advising on a regulated mortgage contract and arranging a regulated mortgage contract to include advising and arranging on variations of pre-2004 first-charge CCA mortgages.
“This means firms that conduct activities in relation to these loans will need to hold the appropriate mortgage permissions in place of consumer credit permissions.
“The administration and activities in relation to variations of pre-2004 first-charge CCA mortgages will become regulated mortgage activities from 1 October 2016, although firms who wish to adopt the new rules early can do so at any date from 21 March 2016.”
Before 31 October 2004, when mortgage regulation was introduced by the Financial Services and Markets Act 2000, first-charge mortgages were regulated under the CCA if they fell below the relevant financial threshold.
| Key facts |
There are approximately 100,000 pre-2004 first charge CCA mortgage loans outstanding This means the total outstanding book amounts to roughly £4.7bn. Assuming there are 100,000 loans outstanding, estimated total one-off costs to industry are approximately £6.1m This cost would be off-set by savings of around £3m a year. Source: FCA |
At the beginning of November, HM Treasury published a statutory instrument which will make the administration of these mortgages a regulated mortgage activity, and the CCA will then no longer generally apply.
The consultation document said: “Many of the respondent firms stated that they would welcome the introduction of mortgage rules for pre-2004 first-charge CCA mortgages, identifying benefits such as long-term cost savings, and the opportunity to harmonise systems and processes for all secured lending.”
Adviser view
David Wilson, managing director of Newcastle-based NE Money, said: “It does make sense to bring it all under one regulatory umbrella because, regardless of the amount, you are looking at a regulated process.”
