FSA's homeloans proposals too patchy

For many consumers, taking out a mortgage is one of the most significant financial commitments they will make in their lifetime.' It's hard to disagree with this statement from a senior executive at the Financial Services Authority, introducing a consultation document on how to make that commitment less risky through the regulation of mortgage advice.

In fact, the FSA's view rather understates the importance of mortgages and property in homeowners' lives now that so many other types of investment are falling apart.

Not only is the homeloans market hideously complicated, with thousands to choose from, but property will increasingly be the target for financial engineering as institutions and advisers seek ways to exploit the wealth tied up in homes. It is appropriate that mortgage advice be regulated and policed to the same standards as other forms of financial advice.

But the Government, whose instructions are implemented by the FSA, has chosen to exclude key aspects of the mortgage market from regulation. Home reversion plans - where owners, mostly the elderly, sell a share in their properties in return for a lump sum - are outside the new regime, along with buy-to-let loans and second mortgages.

The Government appears to have used a narrow, legalistic criteria to define a mortgage. So, the new regime will exclude areas where vulnerable consumers could be at the greatest risk from poor advice. As property values soar and the value of pensions fall, home-reversion plans will be sought out by owners desperate to supplement their incomes.

Buy-to-let property ownership has become the investment craze of the noughties. Second mortgages are used by people who are strapped for cash or pressurised into package deals for new kitchens and bathrooms.

Homeowners need regulated, comprehensive advice. The Government and the FSA may be forced to widen the protection parameters. They must not wait for people to be caught up in scandals arising from their investment in property.