Mortgage regulation 'will cost borrower only 15p

The case for tougher mortgage rules will be given a boost today by a report suggesting that regulation would cost only an extra 15p a month for the typical borrower.

While consumer groups and campaigners have been pressing for the home loans industry to be policed by the financial services authority, concern has been expressed by some in the industry that it would pile extra costs on companies.

Those costs would ultimately be borne by millions of mortgage holders. There have been suggestions that the FSA would need as many as 200 more regulatory staff if it were to be given oversight of the mortgage sector.

The new findings - disclosed by sources close to the report's authors at the FSA - could lead the government to conclude that formal regulation of the £90bn a year sector would greatly improve consumer protection without significantly adding to the costs they face.

According to the source, an FSA investigation into the potential costs and benefits of regulation found that it might add 15p a month to the mortgage payments of someone with a £60,000 home loan.

The figures will be published at a mortgage seminar being hosted by the treasury today to discuss ways of ensuring customers are treated fairly.

Many experts believe statutory regulation is inevitable following a barrage of adverse publicity about the allegedly large scale mis-selling of mortgage endowments, excessive lock-in penalties and unfair terms.

Adding mortgages to the remit of the FSA would mean they would be subject to the same level of scrutiny as investments and personal pensions.

It could mean a statutory code of conduct for lenders instead of the present voluntary limits, a compulsory complaints and compensation scheme and the introduction of mandatory qualifications for mortgage advisers.

Later this week the government will continue with its crusade to clean up the mortgage industry.

Only days after announcing plans for minimum standards of fairness and simplicity for home loans, it will try to help those considering taking out a mortgage by publishing a list of "key questions" borrowers should ask lenders about their products. These are likely to cover issues such as early redemption penalties, fees for arranging the home loan and the degree of flexibility offered.

Trade and industry secretary Stephen Byers has called for a "mortgage summit" on October 29 to discuss the allegations. Before the summit, "as a first step to help consumers considering taking out a mortgage now", he will this week publish the "10 key questions" they should ask lenders and financial advisers when they discuss buying a home loan.

Today's meeting in London is being described by the treasury as a "listening exercise", rather than another dressing-down for the industry. Among those taking part will be the Council of Mortgage Lenders, which recently bowed to pressure and conceded that mortgages should be subject to formal regulation.