Rule change rocks mortgage advisers

NEW controls on home loans have been blasted by mortgage advisers as it emerged Alliance & Leicester was forced to suspend online lending ahead of yesterday's launch of the system.

Chris Cummings, director of the Association of Mortgage Intermediaries, said the new regime - under which the Financial Services Authority regulates such lending - was 'a sledgehammer to crack a nut'.

The AMI estimates the cost to lenders and firms gearing up for yesterday's 'M-day' was more than £200m, or at least £100 for each new mortgage.

Cummings said: 'Last year, the industry had 98 complaints, of which 46 went against firms and the average payout was between £2,000 and £3,000. It would have been cheaper to have paid £1m to each of these.'

Meanwhile, A&L has joined Abbey and Direct Line in temporarily withdrawing some services while it updates systems to cope with the new rules. A&L withdrew its online mortgage service while 'extensive system changes are made'. A company representative said the service was due to restart today.

M-day brought more than 10,000 lenders and advisers within the scope of legally enforceable regulations for the first time.

The now-defunct Mortgage Code Compliance Board, which oversaw the old voluntary code, is estimated to have cost £5m a year to run. Even the FSA has said statutory regulation cost £136m to establish, with annual running costs thereafter of £68m.