Homebuyers could get less protection when they take out a mortgage under Tory plans to slash red tape, saving British industry £14 billion a year.

Conservative MP John Redwood, who heads the party’s economic competitiveness policy review group, will say on Friday that there is no need to regulate mortgages because the lender, not the customer, takes the risk.

The Financial Services Authority (FSA), the City watchdog, has regulated the home-loan market since October 2004.

Since then, lenders and brokers have had to provide a four to eight page ‘key features’ document every time a borrower takes out a mortgage.

Consumers were also given the right to take complaints to the Financial Ombudsman Service.

Critics of the Tory plans said borrowers would lose out because the key features document has made it easier to compare mortgages from across the market.

However, others said that the cost of regulation has outweighed the benefits. The Council of Mortgage Lenders (CML) has estimated that it has added £100 to every home loan.

It said mortgage regulation cost lenders an estimated £166m to set up – double the original estimate - plus an extra £68m a year.

Ray Boulger of Charcol, a mortgage broker, said: “The key features document has been useful because it gives borrowers more information with which to compare loans. Regulation has also cleaned up some of the worst excesses in the sub-prime market.

“Consumer protection has certainly increased, but the question is whether, at £100 a mortgage, it has been good value for money.

“I think the Tories will find it difficult to scrap mortgage regulation unless we get more opt outs from the European Union, though, as we are expecting a directive on the market within a few years.”

Redwood’s plans, which he will say are a “tax cut by any other name”, will also include scrapping home information packs (Hips) and watering down money-laundering restrictions on banks and building societies.

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