The announcement means that, should the motion be passed by parliament in October, the Financial Services Authority (FSA) will be placed in charge of overseeing these sectors next year.
Ed Balls MP, the economic secretary of the Treasury, said: “I’m delighted to announce changes which will offer valuable new protection for consumers wanting to release equity from their home and for people taking out Ijara home finance plans.”
The addition of reversions to the regulator’s responsibilities will bring it into line with lifetime mortgages – already overseen by the FSA.
Mark Neal, managing director of Economic Lifestyle, welcomed the move. “The general view is that FSA regulation will help the industry. The lack of regulation has meant reversions have not been taken up as much as lifetime products but regulation provides the necessary safeguards and means advisers will support it. I’d expect to see an increase in business as a result.”
Islamic mortgages had previously been shrouded in confusion to all but dedicated providers.
However, Frank Thurlby, compliance director at GHL, believed the government had responded to industry demands.
“The government had to move to bring the sector under MCOB rules. Currently, most Islamic products are not what are traditionally classed as mortgages, rather as investments, so most brokers won’t look at them. Many were waiting for regulation before moving into this field.”
Paul White, consultant at Belgravia Insurance Consultants, commented: “Due to the age group home reversions are aimed at, it is important the products are seen to be on the level. Regulation will bring an added level of protection.
“Islamic mortgages are a niche area so if they are brought under the FSA’s control and regulated, more people will understand them.”
