FSA hammers home loans

OF all Britain's markets in financial services, mortgages is one of the most competitive. Anyone buying a home has had the choice of hundreds of offerings from suppliers ranging from the big banks to small building societies with an intricate knowledge of local communities.

Then along came the Treasury, which in the face of a rearguard action from the then head of the Financial Services Authority Sir Howard Davies decided that mortgages needed to be regulated. In the past, too many had been sold to unsuspecting home buyers with disappointing endowment policies attached.

This was a case of taking a sledgehammer of regulation to crack a nut and the results are predictably chaotic.

As we report today, many brokers have not received their firm's mortgage authorisation number which is provided by the FSA.

Some lenders have found it all but impossible to produce key documents online because of difficulties with IT systems. Others, including big lenders, have declined to email these key facts because of fears they might breach the Data Protection Act.

As is the case with all regulation, the consumer ends up paying. Estimates vary but fees for taking out a mortgage are expected to rise by at least £100. So the government has contrived to create a more expensive system, constrained by red tape in a market that was freely competitive.

But topping the list of unintended consequences will be the impact on smaller players in the market, including the community-based building societies. The costs of running the system are so great that many look as if they will have to merge with bigger organisationsto spread the costs and gain access to computing systems.

As a result, we are likely to end up with much less choice in the system with a few super-mutuals like Nationwide, Portman and Brittania, and the big banks.

No doubt there will be some innovation with Tesco planning to dip into home loans in partnership with the Royal Bank of Scotland. It is promising 'a simple, straightforward and great value option'.

It is a wonderful idea. But the FSA does not do simplicity.

Battle of the suits

MEASURING Matalan's menswear sales against Marks & Spencer's is a bit like comparing chalk and cheese.

Matalan is at the booming discount, low-margin end of the market. M&S, particularly for men's suits, is distinctly upmarket with its Autograph, Sartorial and Italian ranges. Indeed, menswear is one of the few parts of M&S's business that has held up through all the difficulties.

This is not to say that it will not face future problems. Value retailing is all the rage and Tesco, Matalan and Next all undercut M&S on price.

So it is not surprising that in volume terms Matalan is able to claim 9.7% of the market against M&S's 9.5%. But at Matalan it is jeans that are selling best. This was never really one of M&S's key products, despite the Blue Harbour range that is modelled on Ralph Lauren.

Nevertheless, one cannot overestimate the task ahead for Stuart Rose. In food he is fighting a losing battle against Waitrose and Tesco and may soon find himself competing against an invigorated J Sainsbury, if Justin King can pull it off.

In women's clothing, share has been in long-term decline with Philip Green's Arcadia chain and Next providing a real challenge. The last thing he needs is to be outgunned in menswear.

One cheering thought is that the High Street has not been too damaged by higher interest rates so far. The latest CBI distributive trades survey shows a recovery in retail spending in October which will be reassuring. But it is worth noting that the three-month moving average is only just in positive territory, the lowest level since April 2003.

There is nothing in the CBI survey to suggest that the Bank of England needs to do anything about interest rates when it meets this week, even though this is the month of the Inflation Report - which in the past has predicted change.

Footsie trigger

FURTHER evidence that the change to international accounting standards is going to revolutionise company analysis comes from broker JP Morgan.

It estimates that the end to goodwill write-offs (mentioned in this space yesterday) will increase the aggregate earnings of Britain's FTSE 100 companies by an astonishing 38%. Suddenly, some of our companies are going to look as if they are doing a great deal better.

At last, there may be a trigger for the long-awaited Footsie rally.