Call to regulate commercial mortgage advice

An IFA is calling on other intermediaries to lobby their MPs and push for the regulation of the commercial mortgage advice market.

Peter McGahan, managing director of Worldwide Financial Planning, is arguing the FSA needs to ensure all mortgage advisers are appropriately regulated, and this should extend to commercial mortgages as there is no requirement to monitor the activities of commercial lending.

His argument stems from the current regulatory regime which places a requirement on a mortgage or investment adviser firm to ensure advisers are sufficiently qualified to give advice.

More importantly, argues McGahan, should a mortgage adviser leave a firm and set up their own operation, the mortgage adviser is able to specialise in unregulated commercial finance, however, this could leave consumers with potentially no protection should they have any problems with either the advice or the product they sign up to.

“Advisers should lobby their MPs today to get commercial mortgages regulated because people can call themselves commercial specialists and not need to be regulated,” says McGahan.

It is a stance not all mortgage firms necessarily agree with, however, as intermediaries note there is a fine line between what is considered a large-scale commercial business venture and a financing deal for an individual looking to move into the buy-to-let market.

David Hollingworth, spokesman for London & Country, acknowledges while the firm does not itself do commercial lending, he suggests the call for regulation is unlikely to be heard because of difficulties in defining “commercial lending”.

That said, he suggests it may be possible to argue individual borrowers looking to hold one or two buy-to-let properties should have improved regulatory protection given the close proximity of buy-to-let to traditional mortgage lending.

“You would probably find strong opposition to the regulation of commercial lending, but there is more call for regulation of buy-to-let where there is more direct contact with the consumer,” says Hollingworth.

“There is a fine line between what constitutes buy-to-let and commercial lending because you may have one person letting one flat out who, you could argue, may need the same protection as consumers but another person with 80-90 properties is running them as a business and would not need the same protection,” he adds.

A spokesman for the FSA says buy-to-let is considered an investment option and any decision to regulate the commercial mortgage or buy-to-let market would be decided by the Treasury.

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