Mortgage advice regulation is a step up

With around 3,000 mortgages on the market at any one time, it's no great surprise that most homeloan hunters are desperate for guidance. At present, the quality of advice a borrower receives is haphazard since mortgage advice falls outside the scope of financial services regulation. But Treasury Minister Ruth Kelly announced last week that advice will be regulated in future: mortgage advisers will be held accountable for the recommendations they make.

The mortgage market, despite the vast choice available, has become less of a minefield for borrowers in recent years as consumer and media campaigns have resulted in 'cleaner' products with fewer penalties and traps. But regulation of advice should improve the market further, by weeding out brokers who are glorified salesmen rather than skilled, impartial experts. With luck, regulatory tentacles will also get a grip on the murkiest area of the homeloan market, where second mort gages are peddled aggressively to people already severely overstretched.

Simultaneously, and in another move that should benefit consumers, the Government announced that general insurance, which includes motor and household policies, will also be regulated. This has been prompted by the implementation of a European directive and should improve the quality of advice given by insurance brokers.

Two of the most problematic types of insurance are travel policies sold with package holidays and extended warranty policies sold with consumer goods. In both cases the policies are sold by people who often have little knowledge of the fine print. The Government has not yet decided how to deal with packaged products, but is reviewing the market. There will be howls of pain from travel agents and retailers if they are forced to train their sales people in the insurance products they are selling in order to collect the commissions on offer. But, as in the case of backstreet mortgage brokers, unless this area is addressed the regulation of general insurance will be incomplete.

Regulation will not be a panacea for mis-selling and there could be a price if it forces up the cost of products. But it should shine some light on the financial services that provide some of our most widely bought and used products.