The regulation of new and existing second charge residential mortgages is to be transferred from the Office of Fair Trading (OFT) to the Financial Services Authority (FSA).
Financial secretary to the Treasury, Mark Hoban, said the move will enhance consumer protection in the mortgage market and ensure consistent standards. It will also simplify the regulatory environment for lenders and borrowers.
This move means that consumer protections are maintained when a mortgage book is sold by a mortgage lender to an unregulated firm.
The package of measures also extends the current regulation of the sale and rent back market to all providers.
Hoban said: “The government believes that this package of measures will enhance protection for consumers in the mortgage market.
“Giving the FSA responsibility for the whole residential mortgage market will simplify the mortgage regulation landscape for consumers and lenders.
“This will ensure that existing second charge mortgage borrowers who fall into arrears or face repossession on both first and second charge mortgages benefit from being regulated by a single organisation, maximising consumer protection and ensuring a more coordinated approach between lenders.
“The measures on mortgage books and sale and rent back have been introduced to address a genuine gap in the regulatory architecture, and will ensure consumers will be better protected in the mortgage market.”
The statutory instruments will be published later in 2011 but the government expects the FSA to begin work immediately to put these measures in place.
Registered housing associations in Northern Ireland will be exempt from being regulated by the FSA.