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Thursday Nov 26, 2009

UK plans reform of home loans

Britain unveiled plans yesterday for tougher regulation of the huge home loans market as fallout from the credit crunch highlights concerns about lax lending standards and fraud.

The government is proposing to expand the Financial Services Authority's (FSA's) remit to cover buy-to-let and second-charge mortgages or additional loans on a home that is already subject to a mortgage.

The FSA currently supervises primary mortgages, with additional loans regulated by the Office of Fair Trading.

Loans worth up to £1.7 billion (R21bn) have been sold by troubled lenders needing to shore up their finances in the downturn. Some of the loans had been snapped up at discounts by hedge funds and private equity groups, the government said.

Sarah McCarthy-Fry, a junior finance minister, said the global financial crisis had raised issues around the world about regulation of the mortgage market. "We are determined to reform the system for the future, to offer both stronger protection for consumers and greater stability in the housing market," she said.

But the plans may never see the light of day, at least in the Labour government's preferred form, with an election due by June next year. The opposition Conservative Party, which is tipped by opinion polls to win the election, has said it would abolish the FSA.


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