Sheila McKechnie: "Early Christmas present"

Ruth Kelly said that it was vital that people got the right mortgage advice, when it was the "biggest financial decision of most people's lives".

She said: "Regulation will ensure a high standard of advice is available across the board to the large number of people - 1.2m in 2000, who take out mortgages every year."

The decision to regulate mortgage advice is a change of heart by the government.

Under so-called N3 changes, the FSA was to assume regulation over the type of "information" given to consumers - and not advice.

The FSA said that it would conduct a full review of N3 changes in the light of its new role.

Insurance standard

The selling of general insurance, such as travel, motor and home insurance is currently overseen by the General Insurance Standards Council.

But the new measures will expand the FSA's insurance brief widely.

General insurance includes travel, home, motor insurance, and pet insurance.

Intermediaries, such as brokers, and the sale of life protection products - currently not regulated by the FSA - will also be brought into its remit.

Under the new regime, insurance intermediaries, will be allowed a "passport" to sell insurance products into other European Union member states under the Insurance Intermediaries Directive.

The Treasury said that its measures would "streamline" regulation.

Measures welcomed

Sheila McKechnie, director of the Consumers' Association welcomed the strengthening of financial services regulation.

She said: "This is a great victory for consumer protection and a brilliant early Christmas present.

"We are delighted that the Government has listened to consumers and has acted decisively to regulate the mortgage advice process.