Brown to put home loans under FSA

The chancellor, Gordon Brown, will announce early in the new year that home loans are to be regulated by the financial services authority, write Dan Atkinson and Jill Treanor .

The move will require a fundamental change in British law and could pave the way for all aspects of consumer credit to come under the FSA's wing.

It is thought the final decision to bring mortgages within the FSA's remit was taken only after a fundamental review of the issue by the treasury's new minister responsible for financial regulation, economic secretary Melanie Johnson. She was keen to ensure this shake-up in the regulatory system did not occur simply because of media pressure for action to help homeowners.

Until now, mortgages have been considered as loans rather than investments, thus have been reg ulated in the same way as bank overdrafts or hire-purchase, although the investment element of an endowment mortgage has always come under the surveillance of the appropriate authority.

The expected shift to regulation by the FSA will mean the authority will need about 200 extra staff on top of about 1,760 staff who now supervise banking, broking, life assurance, unit trusts and pensions.