Selling your home could become more difficult. With latest surveys indicating that the housing market is slowing down.
The mortgage industry is currently only subject to voluntary codes of practice, but as of 31 October all mortgage brokers must be compliant with new regulations overseen by the Financial Service Authority (FSA). Those who fail to be compliant will not be allowed to trade legally after that date.
Time is running out for mortgage brokers who wish to be compliant by 31 October, and the same is true for their clients, who may well find themselves without a mortgage broker part way through the house buying process. So far, less than one third of mortgage brokers in the UK have applied to the FSA for authorisation to trade.
Pam Burnett of UKMC says that the situation is a ticking time bomb for the mortgage industry and the house buying public: "Sadly, mortgage brokers are sticking their heads in the sand on this one. They represent one of the last professional groups to face strict regulation, yet most of them are currently doing nothing about it. They will have to move fast if they are to be compliant by 31 October and so remain in business."
Ms Burnett and her colleagues at UKMC say that it is imperative for house sellers to make sure that their buyers mortgage broker will be compliant by 31 October. It is a critical time in the house purchase chain and you don't want to be left in the lurch by a mortgage broker not being able to trade.
"Buying and selling a house is the most costly and stressful thing that a person can do," added Ms. Burnett, "and between now and November is a critical time. If mortgage negotiations span that crucial end of October period and the mortgage broker is not compliant come 1 November, clients will have to start the process all over again, which may mean losing both the property of their dreams and the fees they have already paid their broker."
The UKMC has some useful questions that house sellers should ask their Estate Agent to check out with a buyer's mortgage broker now:
· Has the buyer's mortgage broker applied for authorisation from the FSA?
· If he has applied, is he ready for authorisation? In other words, can he show the regulator that he can operate his business within the new rules?
· If he has not applied, he may have to cease trading after 31 October. What will happen to the sale if that happens?
But it is not just house sellers and buyers today that will face a problem. According to the UKMC, the failure of mortgage brokers to address compliance will have a number of negative effects on the housing market as a whole, including:
· A reduction in the choice of brokers available
· The fact that the FSA will be looking for non-compliant brokers quickly after the regulations take effect - which will probably mean substantial fines and the banning of some individuals from the industry
· Further reductions in consumer choice as many lenders will seek to work only with brokers who can satisfy them that they are fully compliant with the new regulations.
"The consumer is not alone on this issue," commented Ms. Burnett. "If they do not wish to confront a mortgage broker direct, we will be more than happy to do it for them. Our feeling is that, if the industry cannot face change from within, then it will have to bow to the demands of its client base. The more people who ask the right questions of their mortgage broker now, the more we hope will be compliant by 31 October this year."
