Green light for new home finance regulation

The Financial Services Authority (FSA) today publishes final rules for the regulation of Home Reversion plans (HRs) and Islamic law-compliant Home Purchase Plans (HPPs), which will come within its scope next year.

The FSA's rules, which following consultation earlier this year, are designed to ensure that people who wish to take out either of these products (both based on sale and lease arrangements), enjoy consumer protection comparable to that already in place for equivalent products - lifetime mortgages in the case of HRs and conventional mortgages for HPPs.

The new regimes will come into force on 6 April next year following Parliamentary approval of the necessary secondary legislation last week - and the FSA can start to accept authorisation applications for these new 'home finance' activities from 6 November this year.

Dan Waters, FSA Director of Retail Policy, said:

"Regulation of these sale and lease arrangements introduces important new protections for consumers in the housing market. It will help older consumers looking to release equity from their homes by extending protection over both sectors of the equity release market. It will also ensure fairer treatment for consumers wanting to buy their homes in way that is compliant with Islamic law, building on the work that we have already done in the field of Islamic financial services to improve consumer access to these products.

"Regulation is only five months away and firms need to make sure that they are fully prepared. We start accepting applications from November 6 and firms are advised to apply early to ensure that they are ready in good time for the start of the new regimes next April."

The key benefits for consumers are:

• firms offering these products must be fit and proper and appropriately resourced with staff competent to undertake this business;
• consumers will get clear, concise and consistent information about a firm's services and products on offer (including appropriate risk warnings) so they can make informed choices;
• consumers will get good quality advice and be sold suitable products which take account of their circumstances and needs; and
• if things go wrong, consumers are able to obtain redress, if appropriate.
  
  The rules published today include the final fees rules for HR and HPP firms, on which the FSA consulted separately in the summer. The final reporting requirements will be published next month.

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