Overdue clean-up for a murky market

Britain's 11 million homeowners should finally hear this week how the Government plans to clean up the mortgage market. Signs point to legal restraints, under the Financial Services Act, on how borrowers are advised.

An announcement was originally expected before Christmas, but there has been tension between the Government (keen on regulation) and senior civil servants (not convinced), and rivalry between the Treasury and the Department of Trade and Industry over who does what in a clean-up that has lots of good PR mileage.

The question for home buyers is: will it become easier to choose a loan without fear of rip-off? The short answer is yes, but there are some caveats. Lenders are likely to retain freedom to construct complex deals that borrowers will still find it difficult to compare. Those who want something simple will be steered towards the Catmarked loan, where rates will be pegged to between 1 and 2 per cent over base rate and interest must be calculated daily, to maximise the rate at which the loan is reduced.

Ironically, this week's announcement is being made after moves by the industry to improve its products and advice. But it has taken media campaigns and the threat of regulation to get this far.

Privately, some lenders are celebrating the arrival of laws to control the industry's excesses, because they believe the cost will drive out smaller players. In the long term this may cut competition but for the moment, and with opportunities to cut costs through the Internet, competition is unlikely to be too heavily dented.